Title: The Impact of EMU on Inflation Expectations
Abstract: This paper analyses the impact of the monetary regime change from the Bundesbank to the ECB on inflation expectations. In the theoretical part, the Barro-Gordon model is used to derive the potential effect of a new central bank on inflation and inflation expectations. The econometric investigation is based on a flexible specification of expectation formation which allows both for rational and adaptive elements. The results indicate that the monetary regime change did not have a strong and lasting impact on the formation of inflation expectations and that the credibility of both central banks is not perceived to differ significantly anymore.