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Macroeconomic Surprises and the Inflation Compensation Curve in the Euro Area

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  • Coffinet, J.
  • Frappa, S.

Abstract

Using daily data stemming from inflation-indexed markets, we analyse the effects of numerous macroeconomic surprises on inflation compensation data - the sum of inflation expectations, risk and liquidity premia - in the euro area between 2 January 2004 and 31 December 2007. Our results suggest that when gauging short and medium-term inflation compensations, market operators are sensitive to surprises related to real activity and prices. Interestingly, oil futures prices tend to impact at some point on the short- and medium-ends of the inflation compensation curve. Notwithstanding, long-term inflation compensations remain generally unresponsive to macroeconomic surprises, attesting the high ECB's credibility.

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Bibliographic Info

Paper provided by Banque de France in its series Working papers with number 220.

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Length: 38 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:bfr:banfra:220

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Web page: http://www.banque-france.fr/
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Keywords: Inflation Compensation ; Macroeconomic Surprise; Eurosystem;

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