Inflation compensation and inflation expectations in Chile
This paper studies the relationship between inflation compensation and inflation expectations in Chile. First, we use the present discounted value methodology to decompose the difference between the unanticipated return of nominal and inflation-linked bonds into news about expected inflation and premiums. Second, we use a general equilibrium asset-pricing model to estimate a time-varying inflation risk premium. Our results show that inflation-expectations movements account for about only 25% of the relative returns, indicating that premiums are a very important source of changes in inflation compensation. We also show that the estimated inflation risk premium is time-varying but seems to be of negligible size, with average size and volatility very close to zero. l II) could be helpful on this task.
(This abstract was borrowed from another version of this item.)
Volume (Year): XXX (2007)
Issue (Month): 3 (julio-septiembre)
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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.:
- Bekaert, Geert & Wei, Min & Xing, Yuhang, 2007.
"Uncovered interest rate parity and the term structure,"
Journal of International Money and Finance,
Elsevier, vol. 26(6), pages 1038-1069, October.
- Geert Bekaert & Min Wei & Yuhang Xing, 2002. "Uncovered Interest Rate Parity and the Term Structure," NBER Working Papers 8795, National Bureau of Economic Research, Inc.
- Lucas, Robert E, Jr, 1980. "Equilibrium in a Pure Currency Economy," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 203-220, April. Full references (including those not matched with items on IDEAS)
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