Inflation expectations from index-linked bonds: Correcting for liquidity and inflation risk premia
| Autor: | Sebastian Watzka, Florian Kajuth |
|---|---|
| Rok vydání: | 2011 |
| Předmět: |
Inflation
Economics and Econometrics Index (economics) Financial economics Survey of Professional Forecasters Risk premium media_common.quotation_subject Bond Monetary policy jel:E52 Astrophysics::Cosmology and Extragalactic Astrophysics jel:E31 jel:G12 Market liquidity General Relativity and Quantum Cosmology Inflation expectations liquidity risk premium inflation risk premium treasury inflation-protected securities (TIPS) state-space model Econometrics Economics Real interest rate Finance media_common |
| Zdroj: | The Quarterly Review of Economics and Finance. 51:225-235 |
| ISSN: | 1062-9769 |
| DOI: | 10.1016/j.qref.2011.03.004 |
| Popis: | We provide a critical assessment of the method used by the Cleveland Fed to correct expected inflation derived from index-linked bonds for liquidity and inflation risk premia and show how their method can be adapted to account for time-varying inflation risk premia. Furthermore, we show how sensitive the Cleveland Fed approach is to different measures of the liquidity premium. In addition we propose an alternative approach to decompose the bias in inflation expectations derived from index-linked bonds using a state-space estimation. Our results show that once one accounts for time-varying liquidity and inflation risk premia current 10-year U.S. inflation expectations are lower than estimated by the Cleveland Fed. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
|
Full Text from ScienceDirect