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Download or read book How Large is the Inflation Risk Premium in the US Nominal Term Structure? written by and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Peter J. N. Sinclair
Publisher : Routledge
ISBN 13 : 1135179778
Total Pages : 402 pages
Book Rating : 4.1/5 (351 download)
Download or read book Inflation Expectations written by Peter J. N. Sinclair and published by Routledge. This book was released on 2009-12-16 with total page 402 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.
Author : Geert Bekaert
Publisher :
ISBN 13 :
Total Pages : 64 pages
Book Rating : 4.:/5 (129 download)
Download or read book The Term Structure of Real Rates and Expected Inflation written by Geert Bekaert and published by . This book was released on 2011 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: Changes in nominal interest rates must be due to either movements in real interest rates or expected inflation, or both. We develop a term structure model with regime switches, time-varying prices of risk and inflation to identify these components of the nominal yield curve. We find that the unconditional real rate curve is fairly flat at 1.44%, but slightly humped. In one regime, the real term structure is steeply downward sloping. Real rates (nominal rates) are pro-cyclical (counter-cyclical) and inflation is negatively correlated with real rates. An inflation risk premium that increases with the horizon fully accounts for the generally upward sloping nominal term structure. We find that expected inflation drives about 80% of the variation of nominal yields at both short and long maturities, but during normal times, all of the variation of nominal term spreads is due to expected inflation and inflation risk.
Author : Ren-Raw Chen
Publisher :
ISBN 13 :
Total Pages : 50 pages
Book Rating : 4.:/5 (129 download)
Download or read book Inflation, Fisher Equation, and the Term Structure of Inflation Risk Premia written by Ren-Raw Chen and published by . This book was released on 2010 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we study inflation risk and the term structure of inflation risk premia in the U.S. nominal interest rates through the Treasury Inflation Protection Securities (TIPS) and an analytical two-factor Cox-Ingersoll-Ross (CIR) model with correlated real rate and inflation. The analytical formula facilitates the estimation of the model parameters and improves the accuracy of the valuation of nominal rates and TIPS, and especially enables us to estimate the term structure of inflation risk premia.We use the two-factor model to evaluate the inflation-index bonds and study the relationship between the real rate and the expected inflation rate implied by the nominal Constant Maturity Treasury (CMT) rates for the period of January 1998 through December 2004. We use the Unscented Kalman Filter (UKF) to estimate the model and the inflation risk premium. The empirical evidence indicates that the expected inflation rate, as opposed to those derived from the consumer price indexes, is very stable and the inflation risk premia demonstrate a steep term structure.
Author : J. Benson Durham
Publisher :
ISBN 13 :
Total Pages : 50 pages
Book Rating : 4.E/5 ( download)
Download or read book An Estimate of the Inflation Risk Premium Using a Three-factor Affine Term Structure Model written by J. Benson Durham and published by . This book was released on 2006 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Peter Hördahl
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)
Download or read book The Inflation Risk Premium in the Term Structure of Interest Rates written by Peter Hördahl and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: A dynamic term structure model based on an explicit structural macroeconomic framework is used to estimate inflation risk premia in the United States and the euro area. On average over the past decade, inflation risk premia have been relatively small but positive. They have exhibited an increasing pattern with respect to maturity for the euro area and a flatter one for the United States. Furthermore, the estimates imply that risk premia vary over time, mainly in response to fluctuations in economic growth and inflation.
Author : Maxim Ulrich
Publisher :
ISBN 13 :
Total Pages : 35 pages
Book Rating : 4.:/5 (129 download)
Download or read book Inflation Ambiguity and the Term Structure of U.S. Government Bonds written by Maxim Ulrich and published by . This book was released on 2012 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: Variations in trend inflation are the main driver for variations in the nominal yield curve. According to empirical data, investors observe a set of empirical models that could all have generated the time-series for trend inflation. This set has been large and volatile during the 1970s and early 1980s and small during the 1990s. I show that log utility together with model uncertainty about trend inflation can explain the term premium in U.S. Government bonds. The equilibrium has two inflation premiums, an inflation risk premium and an inflation ambiguity premium.
Author : Pavol Povala
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (611 download)
Download or read book Estimation of the Inflation Risk Premium written by Pavol Povala and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This master's thesis analyzes the inflation risk premium embodied in the nominal interest rates based on UK government index-linked and nominal securities data in a period of high and volatile inflation, 1985 to 1992, and in a period of low and stable inflation, 1997 to 2007. To recover the inflation risk premium a discrete time term structure model is estimated, using jointly real and nominal yields. Inflation is modeled as an observable factor uncorrelated with latent factors in an affine Gaussian framework. Subsequently, the dynamics of the inflation risk premium and its driving factors are studied in both periods. In the first period, I find the inflation risk premium to be significant most of the time, strongly time-varying and occasionally negative, in the second period the inflation risk premium is only significant at a few points and significantly lower. The variance decomposition of the nominal-to-real yield spread shows that movements in spreads are mostly driven by changes in the inflation risk premium, especially at the long end of the curve.
Author : Peter Hördahl
Publisher :
ISBN 13 :
Total Pages : 50 pages
Book Rating : 4.:/5 (129 download)
Download or read book Inflation Risk Premia in the Term Structure of Interest Rates written by Peter Hördahl and published by . This book was released on 2013 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper estimates the size and dynamics of inflation risk premia in the euro area, based on a joint model of macroeconomic and term structure dynamics. Information from both nominal and index-linked yields is used in the empirical analysis. Our results indicate that term premia in the euro area yield curve reflect predominantly real risks, i.e. risks which affect the returns on both nominal and index-linked bonds. On average, inflation risk premia were negligible during the EMU period but occasionally subject to statistically signifcant fluctuations in 2004-2006. Movements in the raw break-even rate appear to have mostly reflected such variations in inflation risk premia, while long-term inflation expectations have remained remarkably anchored from 1999 to date.
Author : Chung-Hun Hong
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (298 download)
Download or read book Inflation, Consumption and Time-varying Risk Premiums in the Term Structure of Nominal Interest Rates written by Chung-Hun Hong and published by . This book was released on 1993 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Term Structure of Inflation Expectations written by and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Efthymios Argyropoulos
Publisher :
ISBN 13 :
Total Pages : 31 pages
Book Rating : 4.:/5 (13 download)
Download or read book Retrieving Inflation Expectations and Risk Premia Effects from the Term Structure of Interest Rates written by Efthymios Argyropoulos and published by . This book was released on 2014 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper suggests an empirically attractive Gaussian dynamic term structure model to retrieve estimates of real interest rates and in፟lation expectations from the nominal term structure of interest rates which are net of in፟lation risk premium effects. The paper shows that this model is consistent with the data and that time-variation of inflፚtion risk premium and real interest rates can explain the puzzling behavior of the spread between long and short-term nominal interest rates to forecast changes in in፟lation rates, especially over short-term horizons. The estimates of in፟lation risk premium effects retrieved by the model tend to be negative and signiጿicant, which implies that investors in the bond market require less compensation for holding nominal bonds compared to in፟lation-indexed bonds. This is more evident during the recent fiijnancial crisis.
Author : Michael Joyce
Publisher :
ISBN 13 :
Total Pages : 48 pages
Book Rating : 4.:/5 (129 download)
Download or read book Extracting Inflation Expectations and Inflation Risk Premia from the Term Structure written by Michael Joyce and published by . This book was released on 2009 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyses the nominal and real interest rate term structures in the United Kingdom over the fifteen-year period that the UK monetary authorities have pursued an explicit inflation target, using a four-factor essentially affine term structure model. The model imposes no-arbitrage restrictions across nominal and real yields, enabling us to decompose nominal forward rates into expected real short rates, expected inflation, real term premia and inflation risk premia. We find that inflation risk premia and longer-term inflation expectations fell significantly when the Bank of England was made operationally independent in 1997. The 'conundrum' of unusually low long-term real rates that began in 2004 is mainly attributed by the model to a fall in real term premia, though a significant part of the fall is left unexplained. The relative inability of the model to fit long real forwards during much of this recent period may reflect strong pension fund demand for index-linked bonds. Moreover, the model decompositions suggest that these special factors affecting the index-linked market may also partly account for the contemporaneous rise in longer-horizon inflation breakeven rates.
Author : J. Huston McCulloch
Publisher :
ISBN 13 :
Total Pages : 27 pages
Book Rating : 4.:/5 (41 download)
Download or read book The Inflation Premium Implicit in the US Real and Nominal Term Structures of Interest Rates written by J. Huston McCulloch and published by . This book was released on 1998 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Frederic S. Mishkin
Publisher :
ISBN 13 :
Total Pages : 54 pages
Book Rating : 4.0/5 ( download)
Download or read book A Multi-country Study of the Information in the Term Structure about Future Inflation written by Frederic S. Mishkin and published by . This book was released on 1989 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides evidence on what the term structure (for maturities of twelve months or less) tells us about future inflation in ten OECD countries. The empirical results on the information in the term structure contrast with those that find that the level of interest rates help forecast the future level of inflation. Instead, they indicate that for the majority of the countries in the sample, the term structure does not contain a great deal of information about the future path of inflation. The results for France, the United Kingdom and Germany tell a different story, however. In these countries, the term structure contains a highly significant amount of information about future changes in inflation. The evidence in this paper suggests that central banks for most of the countries studied here should exercise some caution in using the term structure of interest rates as a guide for assessing inflationary pressures in the economy, as is currently under consideration in the U.S. central bank. Although there is significant information in the term structure about the future path of inflation for a few of the countries, this is not a result that is true in general. The empirical evidence does reveal, however, that for every country studied except the United Kingdom, there is a great deal of information in the term structure of nominal' interest rates about the term structure of real' interest rates. This finding is an extremely useful one because it suggests that for most countries researchers can examine observable data on the nominal term structure to provide them with information about the behavior of the real' term structure.
Author : Christian Mose Nielsen
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)
Download or read book The Information Content of the Term Structure of Interest Rates About Future Inflation - an Illustration of the Importance of Accounting for a Time-Varying Real Interest Rate and Inflation Risk Premium written by Christian Mose Nielsen and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: During the past 15 years a large number of studies have used the approach suggested by Mishkin (Quarterly Journal of Economics, Vol. 105 (1990), No. 3, pp. 815-828; Journal of Monetary Economics, Vol. 25 (1990), No. 1, pp. 77-95) to examine the information content of the term structure of interest rates about future inflation. The empirical results of these studies, however, are very mixed and often not supportive of the Mishkin model. In addition, many results indicate that the term structure of interest rates only contains limited information about future inflation and that the relationship between the term structure of interest rates and future inflation may not be stable over time. In this paper an extension of the Mishkin model allowing for time-varying expected real interest rates and inflation risk premia is suggested and tested using monthly UK data from 1983:1 to 2004:10. The empirical results show that while the standard Mishkin model indicates that the term structure of interest rates contains limited information about future inflation, the extended Mishkin model indicates the contrary, i.e. the term structure of interest rates contains much information about future inflation when account is taken of time-varying expected real interest rates and inflation risk premia - especially when the long end of the term structure of interest rates is considered. Furthermore, the results indicate a potential structural break in the relationship between the term structure of interest rates and future inflation around the time the Bank of England started targeting inflation rates.
Author : Refet S. Gurkaynak
Publisher :
ISBN 13 :
Total Pages : 62 pages
Book Rating : 4.E/5 ( download)
Download or read book The TIPS Yield Curve and Inflation Compensation written by Refet S. Gurkaynak and published by . This book was released on 2008 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt:
