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Backcasting real interest rates and inflation expectations – combining market-based measures with historical data for related variables

Author

Listed:
  • Burban, Valentin
  • Schupp, Fabian

Abstract

Market-based measures of inflation compensation and market-implied real interest rates contain important information for monetary policy analysis but are available for the euro area only for the period since 2005. However, since they are correlated with other macroeconomic and financial variables that are available for longer periods, it is possible to construct time series for market-based measures of inflation compensation and real rates going back to 1992, using a penalised regression approach. These time series can be used as an input into econometric analysis and for illustrating stylised facts and historical patterns. JEL Classification: C53, E31, E43

Suggested Citation

  • Burban, Valentin & Schupp, Fabian, 2023. "Backcasting real interest rates and inflation expectations – combining market-based measures with historical data for related variables," Economic Bulletin Boxes, European Central Bank, vol. 2.
    • Handle: RePEc:ecb:ecbbox:2023:0002:7
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    More about this item

    Keywords

    inflation expectations; Market-based measures of inflation compensation; market-based real rates; monetary policy;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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