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Macroeconomic drivers of inflation expectations and inflation risk premia

Author

Listed:
  • Jef Boeckx

    (Economics and Research Department, National Bank of Belgium)

  • Leonardo Iania

    (, Université catholique de Louvain, LFIN/CORE)

  • Joris Wauters

    (Economics and Research Department, National Bank of Belgium)

Abstract

We propose a new model to decompose inflation swaps into genuine inflation expectations and risk premiums. We develop a no-arbitrage term structure model with stochastic endpoints, separating macroeconomic variables into transitory parts and long-run, economically grounded determinants, such as the equilibrium real interest rate and the inflation target. Our estimations deliver new insights into how macroeconomic variables affect market-based inflation expectation measures

Suggested Citation

  • Jef Boeckx & Leonardo Iania & Joris Wauters, 2024. "Macroeconomic drivers of inflation expectations and inflation risk premia," Working Paper Research 446, National Bank of Belgium.
    • Handle: RePEc:nbb:reswpp:202402-446
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Inflation-linked swaps; affine term structure model; inflation expectations; inflation risk premia; inflation trend; shifting endpoints;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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