Inflation risk premia in the term structure of interest rates
By: by Peter Hördahl and Oreste Tristani.
Contributors: Tristani, Oreste.; Bank for International Settlements. Monetary and Economic Dept.
Series: BIS working papers -- no. 228
Publisher: Bank for International Settlements
Published: 2007
Place of publication: Basel, Switzerland
Language: eng
Format: Electronic resource
Description: 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.
Notes: Title from PDF file (viewed on June 21, 2007).

"Monetary and Economic Department."

"May 2007."

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.