The sovereign's intention to issue inflation-linked bonds (ILB) is to save money. More than 15 years' experience with this financial instrument in the United States and in several other countries has led to the conclusion that these bonds are costly and basically characterized by low liquidity issues. Recently, various papers have started to analyze the impact of liquidity on ILB yields. This paper summarizes studies concerning ILB liquidity at a glance and adds a new estimation strategy of the liquidity premium based on Campbell & Shiller's (1996) hypothetical ILB yields. We calculate the difference between observed and hypothetical ILB yields, regress this time series on a set of ILB-specific liquidity as well as general market uncertainty measures and find statistically and economically significant effects of the liquidity measures for the United States, the United Kingdom and Canada.

This article proposes a novel way to construct an index for economic policy uncertainty that does not depend on language proficiency. We use two specific features of search volume extraction on Google Trends, combine policy-relevant search queries, and construct our Google economic policy uncertainty index for nine Eastern European countries-a region in which the construction of other economic policy uncertainty indices would require good language proficiency. We illustratively show that major policy-related events are captured and find that shocks on economic policy uncertainty yield a sizable impact on macroeconomic variables.

Abstract. This paper provides an overview of studies that estimate the inflation risk premium using inflation-linked bond (ILB) yields. I categorize existing studies, outline their research designs and compare their estimates for the inflation risk premium. Furthermore, the importance of accounting for ILB illiquidity and an overview of existing ILB liquidity proxies are demonstrated. A discussion of current literature developments, such as the zero lower bound, and an outline for future research directions conclude the paper.

The sovereign's intention to issue inflation-linked bonds (ILB) is to save money. More than 15 years' experience with this financial instrument in the United States and in several other countries has led to the conclusion that these bonds are costly and basically characterized by low liquidity issues. Recently, various papers have started to analyze the impact of liquidity on ILB yields. This paper summarizes studies concerning ILB liquidity at a glance and adds a new estimation strategy of the liquidity premium based on Campbell & Shiller's (1996) hypothetical ILB yields. We calculate the difference between observed and hypothetical ILB yields, regress this time series on a set of ILB-specific liquidity as well as general market uncertainty measures and find statistically and economically significant effects of the liquidity measures for the United States, the United Kingdom and Canada.

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