The Rocky Ride of Break-even-inflation rates
The correlation matrix between break-even inflation rate movements and real interest rate movements across several countries shows puzzling features. Correlation is significantly positive for nearly all cross-border pairs whereas it is nil, positive or negative unsystematically within countries. By means of a correlation matrix decomposition, we provide an explanation for this puzzle.
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- Peter Hördahl & Oreste Tristani, 2012.
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