Estimating Inflation Risk Premia Using Inflation‐linked Bonds: A Review

Kupfer, Alexander

doi:10.1111/joes.12265

Cited by 15 publications

(6 citation statements)

References 128 publications

(353 reference statements)

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“…In general, we can say that empirical estimates of the inflation risk premium vary a lot and are not always positive. In an overview paper, Kupfer (2018) finds that, overall, the estimates of the inflation risk premium are more positive than negative, however. 6 Similarly, the estimates in Bekaert et al (2010) are, except one, all positive (and increasing in the horizon).…”

Section: The Inflation Risk Premium and Structural Outputmentioning

confidence: 99%

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Inflation-Linked Bonds, Nominal Bonds, and Countercyclical Monetary Policies

Westerhout

2020

SSRN Journal

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Although inflation-linked bonds have many advantages, nominal bonds are the most important instrument to finance public debts throughout the world. One explanation that the literature has offered is that nominal bonds make countercyclical monetary policies more effective. This paper reconsiders this argument with a model that features an inflation risk premium in the nominal bonds interest rate. In this model, nominal bonds help to stabilize the economy, but also add to debt service costs. The paper finds that the debt service costs channel is very powerful: in the case of discretionary policymaking, inflation-linked bonds always outperform nominal bonds. The case of commitment qualifies this result. Still, also commitment cannot explain the occurrence of large stocks of nominal bonds alongside small stocks of inflation-linked bonds.

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Section: The Inflation Risk Premium and Structural Outputmentioning

confidence: 99%

“…Note thatKupfer (2018) finds that estimates of the inflation risk premium vary a lot over time and that they are negative in some year in many analyses. This does not seem related to correction for liquidity factors, suggesting therefore that shocks that imply positive correlation between inflation and output do play a role.…”

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confidence: 99%

Inflation-Linked Bonds, Nominal Bonds, and Countercyclical Monetary Policies

Westerhout

2020

SSRN Journal

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“…"Inflation is basically denoted as an economical phenomenon "Chicago university neoclassical followers. Kupfer (2018) believed that, "Inflation is called by only the situation where certain amount of output needs higher money to get that". Quantity of money needs higher than the quantity of output.…”

Section: Review Of Literaturementioning

confidence: 99%

Impact of GDP, Inflation, Population Growth and FDI on Unemployment: A study on Bangladesh Economy

Janifar¹,

N.A.²,

Tanvirul³

2020

African Journal of Economics and Sustainable Development

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Unemployment is a major problem in almost all of the countries of south Asia. Unemployment has become the consistent crucial problem in Bangladesh. Economic conditions, demographic structure, women contribution, movement of rural to urban are the major causes of unemployment in Bangladesh. Economic growth and unemployment have a negative relation in Bangladesh. This study is performed to see the impact of some crucial macroeconomic factors on the increasing growth rate of unemployment in Bangladesh. For conducting the study, data set of GDPs, inflation, population growth, FDI during the period of 1995-2019 of Bangladesh has been used. To find out the impact of inflation, economic growth, population growth and FDI on unemployment rate this study used the Augmented Dickey Fuller test for Unit Root to check whether variables are stationary or non-stationary. Gross Domestic Product (GDP) and Inflation, FDI are stationary on level and intercept and unemployment is stationary on first difference. From the augmented dicky fuller test, co linearity and co integration test, least square method it is observed that there is long run relationship exists among the factors and unemployment in Bangladesh. Economic factors like GDP and, FDI have significant influence on unemployment problem in Bangladesh. Theoretically there has a positive relation between unemployment and economic growth. Granger causality test confirms the unidirectional influences come from the unemployment rate to the economic factors as well. This study will help policy makers to modify policy to reduce the unemployment rate in Bangladesh.

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“…Developments in the research area have focused on also using ILB yields and the associated real interest rate curve. For an overview of this literature see Kupfer (2018) and references therein.…”

Section: Introductionmentioning

confidence: 99%

“…These aspects are considered and taken into account to varying degrees in different studies. Kupfer (2018) grouped research employing ILB yields to analyse the inflation components into two major categories: regression-based approaches and term structure models. The distinction is made according to whether or not a complete term structure model is specified to estimate the relevant market-based inflation measures.…”

Section: Introductionmentioning

confidence: 99%

Break-even inflation rates: the Italian case

Fanari

Iorio

2022

SEF

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Purpose This work aims to study the break-even inflation rates (BEIRs), a widely used market-based measure of expected inflation. The authors focus on Italian Government bonds, one of the most liquid debt markets in the euro area. Design/methodology/approach The authors set up an auto-regressive distributed lag model and regress the BEIR on a set of variables that proxy inflation, market risk aversion, protection against deflation, credit as well as liquidity risk to get some insights into the importance of these factors. Subsequently, to disentangle market participants’ inflation expectations from their associated risk premia, the authors estimate a term structure model for the joint pricing of the Italian Government’s nominal and real yield curves, considering also a credit and a liquidity pricing factor. Findings The results show that BEIRs could be a misleading measure of the expected inflation due to the importance of the inflation risk premium and the credit risk effect. According to the estimates, the decrease of market-based measures of inflation observed in the last part of the sample period seems to reflect a lowering of both inflation expectations and risk premia. Inflation premia co-move with a measure of the tail risk of the long-term inflation distribution, signalling that investors become more concerned with downside risks. Originality/value This study complements the existing literature primarily based on the USA and euro area data focusing on the Italian market. To this end, the authors modify and adapt a well-known term structure model developed for nominal and real curves.

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Estimating Inflation Risk Premia Using Inflation‐linked Bonds: A Review

Cited by 15 publications

References 128 publications

Inflation-Linked Bonds, Nominal Bonds, and Countercyclical Monetary Policies

Inflation-Linked Bonds, Nominal Bonds, and Countercyclical Monetary Policies

Impact of GDP, Inflation, Population Growth and FDI on Unemployment: A study on Bangladesh Economy

Break-even inflation rates: the Italian case

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