10.18452/4510
Netšunajev, Aleksei
Winkelmann, Lars
Inflation ExpectationsSpillovers between theUnited States and EuroArea
Humboldt-Universität zu Berlin, Wirtschaftswissenschaftliche Fakultät
2014
International transmissions
break-even inflation
credibility of monetary policy
identification through heteroskedasticity
structural vector autoregressive analysis
SVAR
310 Sammlungen allgemeiner Statistiken
330 Wirtschaft
Humboldt-Universität zu Berlin
Humboldt-Universität zu Berlin
2017-06-16
2017-06-16
2014-09-08
2014-03-18
2014-03-18
1860-5664
http://edoc.hu-berlin.de/18452/5162
urn:nbn:de:kobv:11-100220006
2195055-6
We quantify spillovers of inflation expectations between the United States (US) and Euro Area (EA) based on break-even inflation (BEI) rates. In contrast to previous studies, we model US and EA BEI rates jointly in a structural vector autoregressive (SVAR) model. The SVAR approach allows to identify US and EA specific inflation expectations shocks. By modeling the heteroscedasticity of the data, we are able to test the identifying restrictions of structural shocks and analyze time-varying spillovers. Adjusted for BEI risk premia, our main result suggests that spillovers of inflation expectations increase during times of macroeconomic stress. We document a significant impact of the European sovereign debt crisis on US expectations. The finding contributes to the discussion about a weakening of inflation control by national central banks and speaks in favor of internationally coordinated policy actions, especially during crisis times.