Computing Long-Term Market Inflation Expectations for Countries without Inflation Expectation Markets

Petra Gerlach-Kristen, Richhild Moessner and Rina Rosenblatt-Wisch

Russian Journal of Money and Finance, 2018, vol. 77, issue 3, 23-48

Abstract: Central banks monitor long-term inflation expectations closely since they reflect credibility. In this paper, we derive daily market-based domestic long-term inflation expectations for eight countries without inflation swap markets. To do so, we use foreign inflation swaps together with foreign and domestic interest rate swaps assuming that purchasing power parity (PPP) and uncovered interest rate parity (UIP) hold or together with spot and forward exchange rates assuming that PPP, UIP and covered interest rate parity (CIP) hold. We confirm the plausibility of our PPP-UIP and PPP-UIC-CIP measures by also applying these methods for countries with inflation swap markets. We moreover illustrate how the data can be used to answer such questions as whether inflation reacts to long-term inflation expectations, whether these expectations are well-anchored and how long-term real interest rates have moved over the past decade.

Keywords: inflation expectations; market-based inflation expectations; anchoring of inflation expectations; long-term real interest rates (search for similar items in EconPapers)
JEL-codes: E31 E44 E58 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://rjmf.econs.online/upload/iblock/724/RJMF_77-03_ENG_Gerlach.pdf

Related works:
Working Paper: Computing long‐term market inflation expectations for countries without inflation expectation markets (2017)
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:bkr:journl:v:77:y:2018:i:3:p:23-48

DOI: 10.31477/rjmf.201803.23

Access Statistics for this article

Russian Journal of Money and Finance is currently edited by Ksenia Yudaeva

More articles in Russian Journal of Money and Finance from Bank of Russia Contact information at EDIRC.
Bibliographic data for series maintained by Olga Kuvshinova ().