Inflation expectations and Real Return Bonds
AbstractThe existence of a market for Real Return Bonds in Canada provides a direct tool with which to measure market expectations of inflation by comparing the yields on these bonds with those on conventional Government of Canada long-term bonds. However, there are other factors besides inflation expectations that may affect the yield differential. After reviewing these factors, the authors note that they can lead to a potentially large bias in the level of inflation expectations. The changes in the differential over time may, nonetheless, be a good indicator of movements in long-run inflation expectations. Based on this measure, expectations of long-run inflation have declined since late 1994.
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Bibliographic InfoArticle provided by Bank of Canada in its journal Bank of Canada Review.
Volume (Year): 1996 (1996)
Issue (Month): Summer ()
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Find related papers by JEL classification:
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
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- Peters, David W., 2007. "The behavior of government of Canada real return bond returns," International Review of Financial Analysis, Elsevier, vol. 16(2), pages 152-171.
- Sharon Kozicki & P.A. Tinsley, 2006. "Survey-Based Estimates of the Term Structure of Expected U.S. Inflation," Working Papers 06-46, Bank of Canada.
- Laatsch, Francis E. & Klein, Daniel P., 2005. "The nominal duration of TIPS bonds," Review of Financial Economics, Elsevier, vol. 14(1), pages 47-60.
- Laatsch, Francis E. & Klein, Daniel P., 2003. "Nominal rates, real rates, and expected inflation: Results from a study of U.S. Treasury Inflation-Protected Securities," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(3), pages 405-417.
- Robert Amano & Don Coletti & Tiff Macklem, 1999.
"Monetary Rules When Economic Behaviour Changes,"
Cahiers de recherche CREFE / CREFE Working Papers
81, CREFE, Université du Québec à Montréal.
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