Assessing the Anchoring of Inflation Expectations in the Euro Area Based on SPF Data
Abstract
This paper uses individual density forecasts from the ECB Survey of Professional Forecasters to analyze the distribution of long-run inflation expectations in the Euro area. We exploit the panel dimension in this dataset to examine whether expectations have become less anchored since the beginning of the financial crisis in 2007. To do so, we test for possible structural change in the main features of the distribution of individual forecasts and for whether or not long-run expected inflation and long-run inflation uncertainty has become more sensitive to different sources of macroeconomic news, including news about the central banks own historical track record. Our results suggest some evidence in favor of a less well-anchored distribution for long-run inflation expectations in the euro area.