Backcasting real interest rates and inflation expectations – combining market-based measures with historical data for related variables

Valentin Burban and Fabian Schupp

Economic Bulletin Boxes, 2023, vol. 2

Abstract: Market-based measures of inflation compensation and market-implied real interest rates contain important information for monetary policy analysis but are available for the euro area only for the period since 2005. However, since they are correlated with other macroeconomic and financial variables that are available for longer periods, it is possible to construct time series for market-based measures of inflation compensation and real rates going back to 1992, using a penalised regression approach. These time series can be used as an input into econometric analysis and for illustrating stylised facts and historical patterns. JEL Classification: C53, E31, E43

Keywords: inflation expectations; Market-based measures of inflation compensation; market-based real rates; monetary policy (search for similar items in EconPapers)
Date: 2023-03
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