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The anchoring of European inflation expectations

  • Jan Marc Berk
  • Gerbert Hebbink

This paper analyses the usefulness of direct measures of consumers' perceptions and expectations of inflation for monetary policy and investigates the degree to which these variables are anchored. We inter alia seek to xplore whether there is a difference in reaction of consumers in countries with more credible central banks and those from countries with less credible central banks. We moreover investigate whether the introduction of euro coins and banknotes in 2002, that can be interpreted as a structural shock, has significantly affected the inflation rate as perceived by consumers. We find that European inflation expectations are relatively robust to sudden changes in inflation or monetary policy surprises, regardless of the credibility of the central bank. The introduction of the euro, however, significantly affected the inflation perception of European consumers.

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Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 116.

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Date of creation: Oct 2006
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Handle: RePEc:dnb:dnbwpp:116
Contact details of provider: Postal: Postbus 98, 1000 AB Amsterdam
Web page: http://www.dnb.nl/en/

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