I propose a new term structure model for euro area real and nominal interest rates which explicitly incorporates a time-varying lower bound for nominal interest rates. Results suggest that the lower bound is of importance in structural analyses implying time-varying impulse responses of yield...

The European Central Bank (ECB) has adopted a mixture of conventional and unconventional tools in order to achieve its mandate of price stability in the current low-inflation, low-interest-rate scenario. This paper contributes to the existing literature by providing a taxonomy of the ECB’s...

This paper uses a "trendy" approach to understand UK inflation dynamics. It focuses on the time series to isolate a low-frequency and slow-moving component of inflation (the trend) from deviations around this trend. We find that this slow-moving trend explains a substantial share of UK inflation...

Using survey data from German households, we find that individuals with lower climate concern tend to have higher inflation expectations up to five years ahead. This correlation is most pronounced among individuals with extremely high inflation expectations. Evaluating candidate explanations, we...

How do households perceive the forecasting performance of the central bank? Using two novel experiments embedded in the Bundesbank's Survey on Consumer Expectations (total N = 9500), this article shows that the majority of German households underestimate the ECB's inflation forecasting accuracy....

According to the two-country full information New Keynesian model with flexible exchange rates, the real exchange rate appreciates in response to an asymmetric negative demand shock at the zero lower bound (ZLB) and exacerbates the adverse macroeconomic effects. This finding requires inflation...

Survey data on inflation expectations show that: (i) private sector forecasts and central bank forecasts are not fully aligned and (ii) private sector forecasters disagree about inflation expectations. To reconcile these two facts we introduce dispersed information in a New Keynesian model,...

This paper empirically investigates the role of long-term inflation expectations for the monetary transmission mechanism. In contrast to earlier studies, we confirm that U.S. long-term inflation expectations respond significantly to a monetary policy shock. In line with a re-anchoring channel of...