Deriving inflation expectations from nominal and inflation-indexed Treasury yields
This paper derives a measure of inflation compensation from the yields of a Treasury inflation-indexed security and a portfolio of STRIPS that has similar liquidity and duration as the indexed security. This measure can be used as a proxy for inflation expectations if the inflation risk premium is small. The calculated measure suggests that the rate of inflation expected over the next ten years fell from just under 3% in mid-1997 to just under 1 3/4% by early 1999, before rising back to about 2 1/2% by the beginning of 2000. This variation is more extensive than would have been expected from a simple model of inflation dynamics or from a survey measure of long-run inflation expectations.
|Date of creation:||2000|
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- Richard Clarida & Jordi Galí & Mark Gertler, 2000.
"Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 115(1), pages 147-180.
- Richard Clarida & Jordi Galí & Mark Gertler, 1997. "Monetary policy rules and macroeconomic stability: Evidence and some theory," Economics Working Papers 350, Department of Economics and Business, Universitat Pompeu Fabra, revised May 1999.
- Clarida, Richard & Galí, Jordi & Gertler, Mark, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," CEPR Discussion Papers 1908, C.E.P.R. Discussion Papers.
- Richard Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," NBER Working Papers 6442, National Bureau of Economic Research, Inc.
- Clarida, R. & Gali, J. & Gertler, M., 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and some Theory," Working Papers 98-01, C.V. Starr Center for Applied Economics, New York University.
- Dominique Dupont & Brian P. Sack, 1999. "The Treasury securities market: overview and recent development," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Dec, pages 785-806.
- Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
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- J. Huston McCulloch & Levin A. Kochen, 1998. "The Inflation Premium Implicit in the US Real and Nominal Term Structures of Interest Rates," Working Papers 98-12, Ohio State University, Department of Economics.
- Mark Fisher & Douglas Nychka & David Zervos, 1995. "Fitting the term structure of interest rates with smoothing splines," Finance and Economics Discussion Series 95-1, Board of Governors of the Federal Reserve System (U.S.).
- J. Huston McCulloch, 2001. "The Inflation Premium implicit in the US Real and Nominal," Computing in Economics and Finance 2001 210, Society for Computational Economics.
- Brian P. Sack, 2000. "Using Treasury STRIPS to measure the yield curve," Finance and Economics Discussion Series 2000-42, Board of Governors of the Federal Reserve System (U.S.). Full references (including those not matched with items on IDEAS)
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