欧洲央行-欧元区的通货膨胀（去锚定）（英）

EUROPEANCENTRALBANK

EUROSYSTEM

WorkingPaperSeries

ValentinBurban,BrunoDeBacker,Inflation(de-)anchoringintheeuro

AndreeaLilianaVladu

area

No2964

Disclaimer:ThispapershouldnotbereportedasrepresentingtheviewsoftheEuropeanCentralBank(ECB).TheviewsexpressedarethoseoftheauthorsanddonotnecessarilyreflectthoseoftheECB.

ECBWorkingPaperSeriesNo29641

Abstract

Thisarticlemeasuresthedegreeofpotentialde-anchoringofinflationexpectationsintheeuro

areavis-à-vistheinflationobjectiveoftheEuropeanCentralBank(ECB).Ano-arbitragetermstructuremodelthatallowsforatime-varyinglong-termmeanofinflationexpectations,π,isappliedtoinflation-linkedswap(ILS)rates,whiletakingintoaccountsurvey-basedinflationforecasts.Estimatesofπhavebeencloseto2%sincethemid-2000s,indicatingthatlong-terminflationexpectationshaveoverallremainedwellanchoredtotheECB’sinflationobjective.Asthisobjectiveishoweverrelatedtothe"mediumterm",expectationscomponentsofvariousforwardILSratesareextracted:theyappeartohavebeenbroadlyanchored,withtentativesignsofde-anchoringuptothetwo-yearhorizon.UsingbackcastedILSrates,estimatesofπaremuchabove2%intheearly1990s,buttheyconvergencetolevelsbelow2%bytheendofthedecadewhentheECBwasestablished.

JELclassification:E31,E43,E47,E58.

Keywords:Inflation-linkedswaprates,surveys,no-arbitrage,shiftingendpoint,inflationex-pectations.

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Non-technicalsummary

Theanchoringofinflationexpectationsisfundamentaltoensurepricestability,andmacroe-conomicstabilitymoreingeneral.Asaresultofthelessonsfromhistory(suchasthecostlyre-anchoringofinflationexpectationsatlowlevelsinthe1980s)andmoderninstitutionalset-up(inflation-targeting,independentcentralbanks),inflationexpectationsarecloselymonitored,inparticularmedium-terminflationexpectationsastheyareadirectmeasureofthecredibilityofthemonetarypolicyofcentralbanks.Thepost-pandemicrecoverytriggeredreneweddiscus-sionsonde-anchoringinflationexpectationsinacontextofinflationrateslastseeninthe1970s,whileatthesametimetheECB2021strategyreviewhighlighted"theneedforacomprehensiveframeworkforassessing(un)anchoring"ofinflationexpectations.

Speakingdirectlytothequestionofinflationde-anchoringintheeuroarea,thisarticleproposesano-arbitrageaffinetermstructuremodelforinferringinflationexpectationsfrommarket-basedmeasuresofinflationcompensation.Thenovelfeatureofthemodelisthatthe

infinite-horizonexpectedinflationrateistimevarying(π).Bycontrast,standardstationary

modelsfeatureafixedendpoint(π*),i.e.forecastsoftheinflationrateareassumedtoconvergeatanypointintimetothesamevalue.

ThemodelproposedinthisarticlealsoconsiderstheECB’ssurveyofprofessionalforecast-ersandtheConsensusEconomicssurveywhenestimatinginflationexpectations.Jointly,theseassumptionsimpactthedecompositionofshort-,medium-andlonger-termeuroareainflation-linked(ILS)swapratesintoexpectationsandinflationriskpremia.ThebaselinedatasetofILSratesusedintheestimationspanstheperiodgoingfromJune2005toDecember2023.ThequestionofwhetherthereisevidenceofadecreaseinthevolatilityoftheinflationtrendwiththeECB’sestablishmentin1998isanalysedwithalongerdatasetofbackcastedILSratesgoingbackto1992.

Overall,resultsshowthattheestimatedlong-termmeasureofinflationexpectationshashardlyeverbeende-anchoredintheeuroareasince2005.Estimatesgodowntocloseto1.80%in2016andreachagainasimilartroughduringCOVID-19.Expectationscomponentsof

short-termILSrates,suchastheone-yearrate,arenotmuchaffectedbyπ,whereasthoseof

longer-term(forward)ratesare,includingtheone-yearforwardratefouryearsahead(1y4yILSrate)andthefive-yearforwardratefiveyearsahead(5y5y).Atthesetwohorizons,inflationexpectationshaveremainedinlinewiththeECBobjective.However,tentativesignsofde-

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anchoringappearintheinflationexpectationscomponentoftheone-yearforwardILSratetwoyearsahead(1y2y),arelevanthorizonasitbroadlycorrespondstothehorizonoftheEurosystem/ECBstaffprojections.

Summingup,thispaperaddressesthechallengeofreliablyestimatingmedium-terminflationexpectations,whichiscentralforthedeterminationof(optimal)monetarypolicy.Withinflationexpectationsbroadlywellanchoredinthemediumterm,i.e.withacrediblemedium-terminflationobjective,monetarypolicydoesnotneedtobeparticularlyrestrictiveinordertobringinflationbacktotarget.Asoftlandingoftheeconomycanthereforebeenvisaged.Butifmedium-terminflationexpectationsweretode-anchor,monetarypolicymighthavetobesignificantlymorerestrictivetobringinflationexpectationsbackinlinewiththeobjective,whichcouldhappenattheexpenseofaneconomicrecession.

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1Introduction

"Thefirmanchoringofinflationexpectationsiscriticalunderanycircumstances,asitensuresthattemporarymovementsininflationdonotfeedintowagesandpricesandhencebecomepermanent."

MarioDraghi,21November2014

Theanchoringofinflationexpectationsisfundamentaltoensurepricestability,andmacroe-conomicstabilitymoreingeneral,astheorisedandshownbyhistory.IntheauthoritativenewKeynesianframework,inflationexpectationsaffecttherealeconomythroughatleasttwochan-nels:inflationexpectationsimpactrealinterestrates(Fischerequation)and,totheextentthatpricesaresticky,firmsformpricesinaforward-lookingway,implyingthatinflationexpectationshaveadirectinfluenceoncurrentinflation(newKeynesianPhillipscurve).Lookingathistory,theUSexperienceofthe1970s-1980sisaprimeexampleremindingthatbringinginflationexpec-tationsdowncanimplysignificantmonetarypolicytightening,possiblyatthecostofeconomicrecessions.Sincethen,itiswellacceptedthatacentralbankcanengineerasoftlandingoftheeconomyonlyifitiscredibleaboutitsinflationobjective,i.e.inflationexpectationsareanchoredtothecentralbank’starget.Intheshorterhistoryoftheeuroarea,theexperienceofthe2010s,withinflationremainingpersistentlybelowtheECB’starget,promptedincreasedattentiontoinflationexpectations(hencethequoteabovebyMarioDraghi).Morerecently,thepost-pandemicrecoverytriggeredreneweddiscussionsoninflationexpectationsinacontextofinflationrateslastseeninthe1970s.

Asaresultofhistoricallessons,andinlinewiththeory,inflation-targetingcentralbanksmonitorinflationexpectationsclosely,inparticularmedium-terminflationexpectationsastheyareadirectmeasureofthecredibilityoftheirmonetarypolicy.Intheeuroarea,theECBusedthediscretionitenjoystoadjustthequantitativedefinitionofitsprimaryobjectiveofpricestability:inflation"below2%"asofOctober1998;"below,butcloseto2%"asofMay2003,and"2%"asofJuly2021,butthedefinitionwasalwaysaccompaniedbythespecificationthattheobjectivereferredtothe"mediumterm".Thisspecificationreflectstheinevitabilityofshort-termdeviationsofinflationfromthetargetandtheuncertaintyinthetransmissionofmonetarypolicytotheeconomy.Italsotakesintoaccountthattheappropriatemonetarypolicyresponse

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toadeviationofinflationfromthetargetiscontext-specific.

Themainaimofthisarticleistoprovideamodel-basedaggregateofseveralmeasuresofmedium-terminflationexpectations.FeedingintotheGoverningCouncil’sdeliberationsonthe2021ECBstrategyreview,

ECB

(2021)highlighted"theneedforacomprehensiveframeworkfor

assessing(un)anchoring".Onepracticalissueinmonitoringmedium-terminflationexpectationsisindeedthattheycanbemeasuredin(many)differentways.Market-basedmeasuresmightrefertoinflation-linkedswap(ILS)rates,break-eveninflationrates,orfixings(short-terminflationswapsattachedtospecificdates).Expectationscanalsobemeasuredviasurveyssoundingoutprofessionalforecasters,marketoreconomicanalysts,consumersorfirms.Whilemuchworkremainstobedone,thisarticleconstitutesafirstanswerto

ECB

(2021)byprovidingamodel

encompassingbothmarket-basedandsurvey-basedmeasures.

Moreprecisely,themodelestimatesatime-varyingmeasureoflong-terminflationexpec-

tations,π("π-star"),andestimatestheinflationexpectationscomponentsofILSrates,while

takingintoaccounttheECB’ssurveyofprofessionalforecastersandtheConsensusEconomicssurvey.Theexpectationscomponentsentailedindifferent(forward)ILSratesspeaktodiffer-entviewsonwhatthe"mediumterm"orientationoftheECB’sinflationobjectivemeans,beittwo,fourortenyearsahead.ThemodelrelatesILSratesacrossmaturitiesbyno-arbitragerestrictions.

Overall,resultsshowthattheestimatedlong-termmeasureofinflationexpectationshashardlyeverbeende-anchoredintheeuroareasince2005(startofILSdata).Estimatesgodowntocloseto1.80%in2016andreachagainasimilartroughduringCOVID-19.Expectations

componentsofshort-termILSrates,suchastheone-yearrate,arenotmuchaffectedbyπ,

whereasthoseoflonger-term(forward)ratesare,includingfortheone-yearforwardratefouryearsahead(1y4yILSrate)andthefive-yearforwardratefiveyearsahead(5y5y).Atthesetwohorizons,inflationexpectationshavealwaysremainedinlinewiththeECBobjective.However,tentativesignsofde-anchoringappearintheexpectationscomponentoftheone-yearforwardILSratetwoyearsahead(1y2y),arelevanthorizonasitbroadlycorrespondstothehorizonoftheEurosystem/ECBstaffprojections.

Thisarticlecanberelatedtotwostrandsoftheliterature:oneoninflationanchoring/trendsintheeuroarea;andtheotherontermstructuremodels.Theliteratureoninflationanchor-ing/trendslooksatarangeofdataandresortsnotonlytoaconceptofanchoringinlevels(e.g.closeto2%ornot),butalsoinchanges(responsivenessofinflationexpectationstomacroe-

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conomicnewsorshocks),andindistributions(e.g.distributionsofindividualsresponsesinsurveysoroption-implieddensities).Ithighlightsvariouslevelsofconcernsdependingontheperiodanalysed.

Beecheyetal.

(2011)comparetheevolutionoflong-runinflationexpectations

intheeuroareaandtheUnitedStates,usingevidencefromfinancialmarketsandsurveysofprofessionalforecasters.Theyfindthatlong-runinflationexpectationsarereasonablywellan-choredinbotheconomiesandthatbothsourcesofinformationsuggestsfirmeranchoringintheeuroareathanintheUnitedStates(datafromthe2000s).Similarly,

HördahlandTristani

(2014)findthat,aftercorrectingforliquidityandinflationriskpremia,long-terminflationex

-pectationsextractedfromFrenchandUSbreak-eveninflationrateshaveremainedremarkablystableatthepeakofthefinancialcrisisandthroughouttheGreatRecession(dataupto2013).Afewyearslater,

ŁyziakandPaloviita

(2017)analysetheanchoringofinflationexpectationsof

professionalforecastersandconsumersintheeuroareatofindthatlonger-terminflationexpec-tationshavebecomesomewhatmoresensitivetoshorter-termonesandtoactualinflationinthe2010s,suggestingsomesignsofde-anchoring.Inlinewiththesesigns,

Grishchenkoetal.

(2019)

proposeameasureoftheanchoringofinflationexpectationsbasedonsurveysthataccountsforinflationuncertainty,andobtainresultssuggestingthat,followingtheGreatRecession,in-flationanchoringimprovedintheUnitedStates,whilemildde-anchoringoccurredintheeuroarea.Inthesamevein,

GarcíaandWerner

(2021)findthattheanchoringofeuroareainfla

-tionexpectationshasweakenedsince2013,and

Corselloetal.

(2021)concludethatlong-term

inflationexpectationshavede-anchoredfromtheECB’sinflationaimas,amongotherthings,thelong-termexpectationsreportedintheECB’ssurveyofprofessionalforecastershavenotregainedthelevelsthatprevailedbeforethe2013-14disinflation.

Brandetal.

(2021)developa

semi-structuralmacroeconomicmodelwitharbitrage-freeyield-curvedynamicstoestimateπ,

interalia,whichtheyfindtobetime-varyingbutoverallrelativelystablearound2%inthe2000sand2010s.

Tworecentpaperstakeasimilarapproachtothepresentonetomodeleuroareainflationexpectations.

Cecchettietal.

(2022)introduceamodelthatfeaturestime-varyinglong-term

inflationwithmarket-basedrisk-adjustedmeasuresofexpectedinflationanchoredtosurvey-basedinflationforecasts(theECB’ssurveyofprofessionalforecasters).Comparedtothemodelpresentedbelow,theirmodelfeaturestime-varyinginflationvolatility,isestimatedbasedonoptionsprices,andtheidentificationoffactorsiscarriedoutdifferently.Resultsalsodiffer:theyfindamorevolatilemedium-termrisk-adjustedexpectedinflation,fallingto0.8%in2016

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andbeingbelow1%frommid-2019toearly2021.Inaddition,

Boeckxetal.

(2024)developa

macro-financemodelprovidingestimatesofπthatcomeclosetothosereportedbelow.While

theygofurtherintotheanalysisofILSrates,e.g.bycarryingoutstructuraldecompositions,

thepresentpaperlooksdeeperintotheimplicationsofmodellingchoicesforestimatesofπand

expectationscomponents.

Regardingtheliteratureontermstructuremodels,themainchallengeistointroduceaso-calledshiftingendpointsothatinflationexpectationsdonotalwaysconvergetoaconstantlong-runmean.Earlyworkinthisrespectcanbefoundin

KozickiandTinsley

(2001)and

DewachterandLyrio

(2006)whoshowtheimportanceoflong-runinflationexpectationsfor

(long-run)bondyields.Buildingonthiswork,

DewachterandIania

(2011)proposeamacro

-financemodeloftheUSeconomywithshiftingendpoints.However,themodellingapproachof

BauerandRudebusch

(2020)istheonepursuedbelowasitbuildsonthecanonicalGaussian

dynamictermstructuremodelof

Joslinetal.

(2011)inwhichthepricingfactorsareobservable

portfoliosofyields(ILSratesinourcase),greatlyfacilitatingmodelestimation.Asshownin

Camba-MéndezandWerner

(2017),thiscanonicalmodelcanalsobeappliedtoILSrates

(seealso

Burbanetal.

2022)

.

BauerandRudebusch

(2020)modeltheshiftingendpointasan

unspannedfactor,asin

Joslinetal.

(2014)

.Besides,themodelpresentedbelowrelatestosurveyforecaststhathavebeenshowntobringusefuladditionalinformationtotermstructuremodels

(KimandOrphanides,

2012)

.

Thearticleisorganisedasfollows.Section2describestheILSandsurveydata.Section3establishesstylisedfactsthatarethenusedtoguidemodellingchoicesdescribedinSection4.

Section5presentsthemainresults,i.e.estimatesofπandexpectationscomponents,while

Section6breaksdowntheseresultsalongthebuildingblocksofthemodel.Section7providesrobustnesstests.Section8concludes.

2Data

Thissectionintroducesthemarket-basedmeasuresofinflationcompensationandsurvey-basedforecastsofinflationusedtoestimatethemodel.Unlikebreak-eveninflationratesderivedfrominflation-linkedandnominalsovereignbondsissuedbyspecificeuroareamemberstates,ILScontractsrefertotheeuroareaasawholeandareconsideredtobelesspronetoliquidity

distortions(ECB,

2021)

.ComparedtoILSrates,survey-basedforecastsdonotentailinflation

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riskpremia(allowingtoconsiderthemrepresentativeof"genuine"inflationexpectations),butareobservedlessfrequently,refertoarelativelysmallgroupofrespondentsandmightsufferfromotherissuesimplyingamisrepresentationofexpectations.WefocusonforecastscollectedfromConsensusEconomicsandtheECB’ssurveyofprofessionalforecasters.

2.1Inflation-linkedswaprates

ILScontractsexchangeafixedrateagainstato-be-realised(floating)inflationrate,withbothratesappliedtoanotionalamount.Onlyone(net)paymentismadeatmaturity,implyingthatILSratesarezero-couponrates.Standardno-arbitrageassumptionsimplythatthediscountedexpectedpay-offreceivedfromthefixed-ratelegisequaltothediscountedexpectedpay-offreceivedfromthefloating-rateleg(sothatthepriceofenteringtheswapiszero).Formally,

wheret,Mistheannualisedanddiscretelycompoundedend-of-monthILSrateofmaturityM

yearsobservedattime(month)t,Itisthereferencepriceindex,It+Myearsdenotes(withsome-

whatloosenotations)thereferencepriceindexinMyears,andE[·]denotestheexpectations

operatorundertherisk-neutralprobabilitymeasureQconditionalontheinformationavailableuptotimet.Aspermarketconvention,thereferencepriceindexistheeuroareaharmonisedindexofconsumerpricesexcludingtobaccoanditislaggedbythreemonths(sothatitisal-

waysobservedwhenenteringILScontracts)

.1

ILSratest,MareprovidedbytheLondonStock

ExchangeGroup(LSEG)formaturitiesbetweenoneandtenyears

.2

Inordertoobtainforward-lookingILSrates,observedratesareadjustedfortheindexa-

tionlag.Inpractice,thiscanbedonebyinterpolatingE[It](whichisnotobservedattime

tbecauseofpublicationlags)fromtheobservedIt−3monthsandE[It+1year−3months]im-

pliedbythe1yILSrate(Equation

1)

.Further,E[It+Myears]canbeapproximatedfromthe

impliedE[It+Myears−3months]andE[It+(M+1)years−3months],andsoonandsoforthfor

E[It+(M+2)years],...,E[It+(M+10)years].Thisinterpolationisdonebylog-linearisationon

1Theroleplayedbytobaccointhedynamicsoftheharmonisedindexofconsumerpricesismarginal,sothattheindexexcludingtobaccoisvirtuallyidenticaltotheoverallindex.

2ThemnemonicsoftheILSdatadownloadedfromLSEGareasfollows:EUHCPT?Y__ICAP,where"?"mustbereplacedbythematurityoftherate(1,2,3,...).End-of-monthbidandaskannualisedquotesareaveragedtoobtaintimeseriesofmidpointrates.

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topofwhichaseasonalinflationpatternisadded(theaveragepatternobservedoverthepreviousfiveyears),following

Camba-MéndezandWerner

(2017,seeAppendixA.1)

.

ComputingILSratesascontinuously-compoundedratesgivesthefollowingrepresentation:

whereπt,Misthecontinuously-compoundedandindexation-lag-adjustedcounterpartoft,M.

Theleft-sidepanelofFigure

1

displaysthe1-yearto10-yearcontinuously-compoundedzero-couponILSratesadjustedfortheindexationlag.ThedataprovidedbyLSEGspanstheperiodgoingfromJune2005toDecember2023(datatotherightoftheverticaldottedlineinthefigure),whichconstitutesthemainsampleusedforthecoreanalysisofthisarticle.Asof2005,ILSratesarecloseto2%butshort-termratesdropsignificantlyinlate2008attheheightoftheglobalfinancialcrisis(failureofLehmanBrothers).Whileshort-termILSrateshadreturnedtocloseto2%bytheendof2010,thecross-sectionofILSratesthengraduallydeclinedtolevelsthatwouldarguablybeincompatiblewiththeECB’sinflationtargetof,atthetime,"below,butcloseto2%overthemediumterm".Forinstance,the5y5yILSratestoodatabout1.5%bymid-2016.ILSratesrecoveredsomewhatbymid-2018butthenslidagaintolowlevelsuntilthetroughreachedattheendofMarch2020inthemidstoftheCOVID-19crisis.ILSratesincreasedsignificantlyoverthenexttwoyears,withshort-termonesreachingall-timehighsinAugust2022beforestabilizingtoaround2.1%attheendofthesample.

Alongerdatasetofmarket-basedinflationmeasuresusesbackcastedILSratesfrom

Burban

andSchupp

(2023)goingbackto1992

.TheirbackcastingprocedureexploitsthecorrelationbetweenILSratesandvariouseconomicvariables

.3

Thelongerbackcastedtimeseriesallowtoestimatemoreprecisely,inprinciple,equilibriumquantitiessuchasthelong-termmeanofILSratesandtocovervariouspolicyregimes.Throughoutthe1990s,ILSratesfollowadownwardpathreflectingthetrendofheadlineinflationacrosscountriesthatwouldlaterbepartoftheeuroarea.ILSratesstabilisedatlevelscloseto2%bytheendofthedecade.Acknowledgingthepossibilityofinflationriskpremia,theselevelsarecompatiblewiththeinitialinflationobjectiveof"below2%"oftheECB.

3Toensureconsistencyalongthecross-section,the1-year,5-yearand10-yearILSratesarebackcastedandothermaturity-specificILSratesareinterpolated.

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ILSrates

1992199720022007201220172022

2y

10y

ly

5y

5y5y

surveydata

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1992199720022007201220172022

米Long-termCEforecasts

。Long-termSPFforecastsRangeofsurveyforecasts

76543210

5

4

3

2

1

0

Figure1:ILSratesandinflationsurveyforecasts.ILSratesarecontinuouslycompoundedandadjustedfortheindexationlagasin

Camba-MéndezandWerner

(2017),andbackcastedbefore2005asin

Burbanand

Schupp

(2023)ashighlightedbythedottedverticalline

.TherangeofsurveyforecastscomprisesforecastsfromConsensusEconomics(CE)andtheECB’sSPF."Long-termSPFforecasts"refertoaveragepointforecastsfortheannualinflationrateinthefourthorthefifthcalendaryear."Long-termCEforecasts"refertoaveragepointforecastsfortheaverageannualinflationin6to10yearstime.

2.2Inflationsurveyforecasts

WeconsiderinflationsurveyforecastsfromConsensusEconomics(CE)andtheECB’sSurveyofProfessionalForecasters(SPF).CEprovidesforecastsoftheannualinflationrateforseveralcalendaryears,so-called"fixed-event"forecasts.Forecastswithhorizonsstartingatthecalendaryearafternextyearanduptothefifthcalendaryearoutareconsidered,amountingtofourforecasthorizons.Veryshort-terminflationforecasts(e.g.forthecurrentandnextcalendaryears)arediscarded,soastocomparesurveyforecaststopurelymodel-basedforecasts(avoidingkeepingtrackofpastreal-timeHICPrealisations)andbecausetheseveryshort-termforecastsarelessrelevanttoestimatethelong-termlevelofinflationexpectations.Besides,long-termforecastsfortheaverageannualinflationrateinsixtotenyearstimearealsoconsidered.TheseCEforecastsfortheeuroareaasawholeareavailablesince2003,onasemiannualbasisuntil2014andonaquarterlybasisafterwards.Before2003andbackuntil1995,syntheticeuroareainflationexpectationsareconstructedbasedonGDP-weightedforecastsforthefivelargesteuroareaeconomies(Germany,France,Italy,SpainandtheNetherlands),andforthethreelargest

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economiesbackuntil1992(Germany,France,Italy).

FromtheECB’sSPF,averagepointforecastsforthefixedhorizonsofoneandtwoyearsaheadareconsidered,aswellastwofixed-eventforecastsforthecalendaryearafterthenextandforthe"long-run".Thislong-runhorizonrepresentstheannualinflationrateinthefourthcalendaryearforQ1andQ2vintagesofthesurveyinagivenyear,andinthefifthcalendaryearfortheQ3andQ4vintages.SPFforecastsareavailableatquarterlyfrequencysince2000.

Theright-sidepanelofFigure

1

showsthetimeseriesofinflationsurveyforecastsweconsider.InflationsurveyforecastsshowbroadlysimilardynamicstoILSrates,althoughfluctuationsarelesspronounced.Surveyforecastsfollowadownwardtrenduptotheendofthe1990s.Insubsequentyears,long-termforecastsshowonlymildfluctuationsatlevelsbelowbutcloseto2%until2014,afterwhichtheygraduallydrop.Long-termsurveyforecastsstartrecoveringasofmid-2020toreachlevelsslightlyabove2%bytheendof2023.Short-terminflationsurveyforecastsdisplaymorefluctuationsthanlong-termforecasts,inp