Finance and Economics Discussion Series: Deriving Inflation Expectations from Nominal and Inflation-Indexed Treasury Yields

Sack, Brian

ISBN 10: 1288716990 / ISBN 13: 9781288716999

Published by Bibliogov, 2013

About this Item

Seller Inventory # I-9781288716999

Bibliographic Details

• Title: Finance and Economics Discussion Series: Deriving Inflation Expectations from Nominal and Inflation-Indexed Treasury Yields
• Publisher: Bibliogov
• Publication Date: 2013
• Language: English
• ISBN 10: 1288716990
• ISBN 13: 9781288716999
• Binding: Soft cover
• Condition: New

About this title

Synopsis

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.