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Central bank asset purchases and inflation expectations

Author

Listed:
  • Boris Hofmann
  • Feng Zhu

Abstract

This article analyses the effect of the asset purchase programmes implemented by the Federal Reserve and the Bank of England in the wake of the global financial crisis on market- and survey-based measures of inflation expectations. The analysis suggests that central bank asset purchases did have significant effects, but that their quantitative importance is uncertain. While short- and longer-term inflation expectation measures displayed sizeable upward movements towards pre-crisis levels during the implementation of asset purchase programmes, the reaction of inflation swap rates on the days of programme announcements suggests that central bank asset purchases were probably not the main driver of these shifts.

Suggested Citation

  • Boris Hofmann & Feng Zhu, 2013. "Central bank asset purchases and inflation expectations," BIS Quarterly Review, Bank for International Settlements, March.
  • Handle: RePEc:bis:bisqtr:1303e
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    References listed on IDEAS

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    1. Meredith J. Beechey & Benjamin K. Johannsen & Andrew T. Levin, 2011. "Are Long-Run Inflation Expectations Anchored More Firmly in the Euro Area Than in the United States?," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(2), pages 104-129, April.
    2. Qianying Chen & Andrew Filardo & Dong He & Feng Zhu, 2012. "International spillovers of central bank balance sheet policies," BIS Papers chapters,in: Bank for International Settlements (ed.), Are central bank balance sheets in Asia too large?, volume 66, pages 220-264 Bank for International Settlements.
    3. Gabriela Galati & Steven Poelhekke & Chen Zhou, 2011. "Did the Crisis Affect Inflation Expectations?," International Journal of Central Banking, International Journal of Central Banking, vol. 7(1), pages 167-207, March.
    4. Gert Peersman, 2012. "Effectiveness of Unconventional Monetary Policy at the Zero Lower Bound," 2012 Meeting Papers 400, Society for Economic Dynamics.
    5. Petra Gerlach & Peter Hördahl & Richhild Moessner, 2011. "Inflation expectations and the great recession," BIS Quarterly Review, Bank for International Settlements, March.
    6. Jonathan H. Wright, 2012. "What does Monetary Policy do to Long‐term Interest Rates at the Zero Lower Bound?," Economic Journal, Royal Economic Society, vol. 122(564), pages 447-466, November.
    7. Refet S Gürkaynak & Andrew Levin & Eric Swanson, 2010. "Does Inflation Targeting Anchor Long-Run Inflation Expectations? Evidence from the U.S., UK, and Sweden," Journal of the European Economic Association, MIT Press, vol. 8(6), pages 1208-1242, December.
    8. Jack Meaning & Feng Zhu, 2011. "The impact of recent central bank asset purchase programmes," BIS Quarterly Review, Bank for International Settlements, December.
    9. Massimo Guidolin & Christopher J. Neely, 2010. "The effects of large-scale asset purchases on TIPS inflation expectations," Economic Synopses, Federal Reserve Bank of St. Louis.
    10. Samuel Reynard, 2012. "Assessing Potential Inflation Consequences of QE after Financial Crises," Working Paper Series WP12-22, Peterson Institute for International Economics.
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    Citations

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    Cited by:

    1. Richhild Moessner, 2014. "Effects of explicit FOMC policy-rate guidance on equities and risk measures," Applied Economics, Taylor & Francis Journals, vol. 46(18), pages 2139-2153, June.
    2. Scharnagl, Michael & Stapf, Jelena, 2014. "Inflation, deflation, and uncertainty: What drives euro area option-implied inflation expectations and are they still anchored in the sovereign debt crisis?," Discussion Papers 24/2014, Deutsche Bundesbank.
    3. Chen, Qianying & Filardo, Andrew & He, Dong & Zhu, Feng, 2016. "Financial crisis, US unconventional monetary policy and international spillovers," Journal of International Money and Finance, Elsevier, vol. 67(C), pages 62-81.
    4. Richhild Moessner, 2014. "Government bond yield sensitivity to economic news at the zero lower bound in Canada in comparison with the UK and US," Applied Financial Economics, Taylor & Francis Journals, vol. 24(11), pages 739-751, June.
    5. Moessner, Richhild, 2015. "Reactions of US government bond yields to explicit FOMC forward guidance," The North American Journal of Economics and Finance, Elsevier, vol. 33(C), pages 217-233.
    6. Richhild Moessner, 2015. "International spillovers from US forward guidance to equity markets," Applied Economics, Taylor & Francis Journals, vol. 47(42), pages 4549-4560, September.
    7. Moessner, Richhild, 2013. "Effects of explicit FOMC policy rate guidance on interest rate expectations," Economics Letters, Elsevier, vol. 121(2), pages 170-173.
    8. Šević, Aleksandar & Brawn, Derek, 2015. "Do demographic changes matter? A cross-country perspective," Journal of Multinational Financial Management, Elsevier, vol. 30(C), pages 36-61.
    9. Scharnagl, Michael & Stapf, Jelena, 2015. "Inflation, deflation, and uncertainty: What drives euro-area option-implied inflation expectations, and are they still anchored in the sovereign debt crisis?," Economic Modelling, Elsevier, vol. 48(C), pages 248-269.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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