Advanced Search
MyIDEAS: Login to save this paper or follow this series

Inflation expectations and the news

Contents:

Author Info

  • Bauer, Michael D.

    ()
    (Federal Reserve Bank of San Francisco)

Abstract

This paper provides new evidence on the importance of inflation expectations for variation in nominal interest rates, based on both market-based and survey-based measures of inflation expectations. Using the information in TIPS breakeven rates and inflation swap rates, I document that movements in inflation compensation are important for explaining variation in long-term nominal interest rates, both unconditionally as well as conditionally on macroeconomic data surprises. Daily changes in inflation compensation and changes in long-term nominal rates generally display a close statistical relationship. The sensitivity of inflation compensation to macroeconomic data surprises is substantial, and it explains a sizable share of the macro response of nominal rates. The paper also documents that survey expectations of inflation exhibit significant comovement with variation in nominal interest rates, as well as significant responses to macroeconomic news.

Download Info

If 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.
File URL: http://www.frbsf.org/economic-research/files/wp2014-09.pdf
File Function: Full text
Download Restriction: no

Bibliographic Info

Paper provided by Federal Reserve Bank of San Francisco in its series Working Paper Series with number 2014-9.

as in new window
Length: 38 pages
Date of creation: 27 Mar 2014
Date of revision:
Handle: RePEc:fip:fedfwp:2014-09

Contact details of provider:
Postal: P.O. Box 7702, San Francisco, CA 94120-7702
Phone: (415) 974-2000
Fax: (415) 974-3333
Email:
Web page: http://www.frbsf.org/
More information through EDIRC

Order Information:
Email:

Related research

Keywords: inflation expectations; macroeconomic news; inflation compensation; TIPS; inflation swaps; survey expectations;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Beechey, Meredith J. & Wright, Jonathan H., 2009. "The high-frequency impact of news on long-term yields and forward rates: Is it real?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 56(4), pages 535-544, May.
  2. Florian Bardong & Thorsten Lehnert, 2008. "TIPS and inflation expectations," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 15(7), pages 513-517.
  3. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1908, C.E.P.R. Discussion Papers.
  4. Joseph Haubrich & George Pennacchi & Peter Ritchken, 2012. "Inflation Expectations, Real Rates, and Risk Premia: Evidence from Inflation Swaps," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 25(5), pages 1588-1629.
  5. Harvey, Campbell R., 1989. "Time-varying conditional covariances in tests of asset pricing models," Journal of Financial Economics, Elsevier, Elsevier, vol. 24(2), pages 289-317.
  6. Hanno Lustig, 2011. "Why Does the Treasury Issue TIPS? The TIPS-Treasury Bond Puzzle," 2011 Meeting Papers 1443, Society for Economic Dynamics.
  7. Nicholas Taylor, 2010. "The Determinants of Future U.S. Monetary Policy: High-Frequency Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 42(2-3), pages 399-420, 03.
  8. Refet S. Gürkaynak & Brian Sack & Eric Swanson, 2005. "The Sensitivity of Long-Term Interest Rates to Economic News: Evidence and Implications for Macroeconomic Models," American Economic Review, American Economic Association, American Economic Association, vol. 95(1), pages 425-436, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Gürkaynak, Refet S. & Wright, Jonathan, 2013. "Identification and Inference Using Event Studies," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9388, C.E.P.R. Discussion Papers.
  2. Michael D. Bauer, 2011. "Nominal interest rates and the news," Working Paper Series, Federal Reserve Bank of San Francisco 2011-20, Federal Reserve Bank of San Francisco.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fip:fedfwp:2014-09. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Diane Rosenberger).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.