235- How Anchored Are Inflation Expectations in EMU Countries?

DNB Working Papers
Date 25 January 2010

Anchored inflation expectations help stabilize inflation. Previous results indicate that monetary policy has been effective in breaking the link between actual and expected inflation at the euro area level. In this paper we examine whether this is also true at the national level. We define the ‘disconnect’ between inflation and inflation expectations and then proceed to examine the extent to which this disconnect exists for a number of euro area countries. Our findings suggest that country-specific inflation experiences still affect national inflation expectations, and certainly more by comparison to the aggregate euro area level. EMU has therefore not made this link disappear at the national level.

Keywords: Inflation expectations, monetary policy, EMU.

JEL Classification:  E52, E58.