The role of inflation expectations in the EMU
This article analyses the role of inflation expectations in the euro area. On the one hand, the question is how inflation expectations affect both inflation and output, and, on the other hand, how inflation expectations reflect developments in these variables. The analysis makes use of a simple VAR model of inflation, inflation expectations and output, which allows for scrutinizing the dynamic interrelationships between these variables. Empirical results strongly suggest that inflation expectations are the key ingredient of the inflationary process for the euro area and they have a significant negative effect on output. Inflation expectations are found to be relatively persistent - almost as persistent as output - albeit they do adapt to developments in both output and (actual) inflation, especially in the medium term.
Volume (Year): 16 (2009)
Issue (Month): 16 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAEL20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAEL20|
When requesting a correction, please mention this item's handle: RePEc:taf:apeclt:v:16:y:2009:i:16:p:1671-1675. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.