Do inflation-linked bonds contain information about future inflation?

José Valentim Machado Vicente and Osmani Guillén

Revista Brasileira de Economia - RBE, 2013, vol. 67, issue 2

Abstract: There is a widespread belief that inflation-linked bonds are a direct source of information about inflation expectations. In this paper we address this issue by analyzing the relationship between break-even inflation (the difference between nominal and real yields) and future inflation. The dataset is extracted from Brazilian Treasury bonds covering the period from April 2005 to April 2011. We find that break-even inflation is an unbiased forecast only of the 3-month and 6-month ahead inflation. For medium horizons (12 and 18 months), break-even inflation has weak explanatory power of future inflation. Over long horizons (24 and 30 months), we report a significant, but counterintuitive, negative relationship between the break-even and realized inflation rates.

Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://periodicos.fgv.br/rbe/article/view/7365 (text/html)

Related works:
Working Paper: Do Inflation-linked Bonds Contain Information about Future Inflation? (2010)
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: https://EconPapers.repec.org/RePEc:fgv:epgrbe:v:67:y:2013:i:2:a:7365

Access Statistics for this article

Revista Brasileira de Economia - RBE is currently edited by Ricardo Cavalcanti

More articles in Revista Brasileira de Economia - RBE from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil) Contact information at EDIRC.
Bibliographic data for series maintained by Núcleo de Computação da FGV EPGE ().