EconPapers    
Economics at your fingertips  
 

Break-Even-Inflation's Decomposition in Mexico

Aguilar-Argaez Ana María, Rocio Elizondo and Roldán-Peña Jessica

No 2016-22, Working Papers from Banco de México

Abstract: This document studies the recent evolution of the break-even-inflation implicit in the yields of long-term financial instruments in Mexico. In particular, it analyzes the dynamics of its main components: the long-run inflation expectation and the inflationary risk premium, which are estimated by means of an affine term structure model of interest rates. The results show that the gradual reduction registered in such compensation in the last years is the result of the decrease showed by both components. This reflects, on the one hand, the progressive convergence of the estimated inflation expectation to Banco de México's inflation target as well as its anchoring and, on the other hand, that nominal-bond holders have required a lower hedging against future inflation, possibly, as a reflection of a lower risk perception associated to it.

Keywords: Inflation; Break-even-inflation; Inflation expectation; Inflationary risk premium (search for similar items in EconPapers)
JEL-codes: E31 E43 E52 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-mac
Date: 2016-12
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.banxico.org.mx/publicaciones-y-discurso ... -43679E983DA3%7D.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:bdm:wpaper:2016-22

Access Statistics for this paper

More papers in Working Papers from Banco de México Contact information at EDIRC.
Series data maintained by Dirección de Sistemas ().

 
Page updated 2017-05-27
Handle: RePEc:bdm:wpaper:2016-22