Inflation risk premia in the US and the euro area
AbstractWe use a joint model of macroeconomic and term structure dynamics to estimate inflation risk premia in the United States and the euro area. To sharpen our estimation, we include in the information set macro data and survey data on inflation and interest rate expectations at various future horizons, as well as term structure data from both nominal and index-linked bonds. Our results show that, in both currency areas, inflation risk premia are relatively small, positive, and increasing in maturity. The cyclical dynamics of long-term inflation risk premia are mostly associated with changes in output gaps, while their high-frequency fluctuations seem to be aligned with variations in inflation. However, the cyclicality of inflation premia differs between the US and the euro area. Long term inflation premia are countercyclical in the euro area, while they are procyclical in the US. JEL Classification: E43, E44
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by European Central Bank in its series Working Paper Series with number 1270.
Date of creation: Dec 2010
Date of revision:
Contact details of provider:
Postal: Postfach 16 03 19, Frankfurt am Main, Germany
Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/home/html/index.en.html
More information through EDIRC
Postal: Press and Information Division, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany
Other versions of this item:
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-11 (All new papers)
- NEP-CBA-2010-12-11 (Central Banking)
- NEP-EEC-2010-12-11 (European Economics)
- NEP-MAC-2010-12-11 (Macroeconomics)
- NEP-MON-2010-12-11 (Monetary Economics)
- NEP-UPT-2010-12-11 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hördahl, Peter & Tristani, Oreste & Vestin, David, 2007.
"The yield curve and macroeconomic dynamics,"
Working Paper Series
0832, European Central Bank.
- Peter Hördahl & Oreste Tristani, 2012.
"Inflation Risk Premia In The Term Structure Of Interest Rates,"
Journal of the European Economic Association,
European Economic Association, vol. 10(3), pages 634-657, 05.
- Peter Hoerdahl & Oreste Tristani, 2007. "Inflation risk premia in the term structure of interest rates," BIS Working Papers 228, Bank for International Settlements.
- Hördahl, Peter & Tristani, Oreste, 2007. "Inflation risk premia in the term structure of interest rates," Working Paper Series 0734, European Central Bank.
- Peter Hordahl & Oreste Tristani & David Vestin, 2003. "A joint econometric model of macroeconomic and term structure," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
- Jens H. E. Christensen & Jose A. Lopez & Glenn D. Rudebusch, 2010.
"Inflation Expectations and Risk Premiums in an Arbitrage-Free Model of Nominal and Real Bond Yields,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 42(s1), pages 143-178, 09.
- Jens H. E. Christensen & Jose A. Lopez & Glenn D. Rudebusch, 2009. "Inflation expectations and risk premiums in an arbitrage-free model of nominal and real bond yields," Proceedings, Federal Reserve Bank of San Francisco, issue Jan.
- Jens H. E. Christensen & Jose A. Lopez & Glenn D. Rudebusch, 2008. "Inflation expectations and risk premiums in an arbitrage-free model of nominal and real bond yields," Working Paper Series 2008-34, Federal Reserve Bank of San Francisco.
- Ulrich, Maxim, 2013. "Inflation ambiguity and the term structure of U.S. Government bonds," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 295-309.
- Kajuth, Florian & Watzka, Sebastian, 2008.
"Inflation expectations from index-linked bonds: Correcting for liquidity and inflation risk premia,"
Discussion Papers in Economics
4858, University of Munich, Department of Economics.
- Kajuth, Florian & Watzka, Sebastian, 2011. "Inflation expectations from index-linked bonds: Correcting for liquidity and inflation risk premia," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(3), pages 225-235, June.
- Petra Gerlach & Peter Hördahl & Richhild Moessner, 2011. "Inflation expectations and the great recession," BIS Quarterly Review, Bank for International Settlements, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Official Publications).
If references are entirely missing, you can add them using this form.