Modeling the dynamics of inflation compensation
AbstractThis paper investigates the relationship between short-term and long-term inflation expectations using daily data on inflation compensation derived from the term structure of real and nominal interest rates. We use a flexible econometric model which allows us to uncover this relationship in a data-based manner. We relate our findings to the issue of whether inflation expectations are anchored, unmoored or contained. Our empirical results indicate no support for either unmoored or firmly anchored inflation expectations. Most evidence indicates that inflation expectations are contained.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Empirical Finance.
Volume (Year): 17 (2010)
Issue (Month): 1 (January)
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Web page: http://www.elsevier.com/locate/jempfin
Inflation compensation Bayesian Nonlinear time series State space model;
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