Are Long-Run Inflation Expectations Anchored More Firmly in the Euro Area Than in the United States?
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Abstract
This paper compares the evolution of long-run inflation expectations in the euro area and the United States, using evidence from financial markets and surveys of professional forecasters. Survey data indicate that long-run inflation expectations are reasonably well anchored in both economies but reveal substantially greater dispersion across forecasters' long-horizon projections of US inflation. Analysis of daily data on inflation swaps and nominal-indexed bond spreads, which gauge compensation for expected inflation and inflation risk, also suggests that long-run inflation expectations are more firmly anchored in the euro area than in the United States. (JEL D84, E31, E37, E52, E58)Citation
Beechey, Meredith J., Benjamin K. Johannsen, and 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, 3 (2): 104-29. DOI: 10.1257/mac.3.2.104Additional Materials
JEL Classification
- D84 Expectations; Speculations
- E31 Price Level; Inflation; Deflation
- E37 Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications
- E52 Monetary Policy
- E58 Central Banks and Their Policies
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