Wednesday, August 21, 2013

Creating a History of U.S. Inflation Expectations

Central bankers closely monitor inflation expectations because they’re an important determinant of actual inflation. Treasury inflation-protected securities (TIPS) are commonly used to measure bond market inflation expectations. Unfortunately, they were only introduced in 1997, so historical data are limited. We propose a solution to this problem by using the relationship between TIPS yields and other data with a longer history to construct synthetic TIPS rates going back to 1971.
FRBNY — Liberty Street Economics
Creating a History of U.S. Inflation Expectations
Jan Groen and Menno Middeldorp

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