 An empirical decomposition of the liquidity premium in breakeven inflation ratesMustafa Guler (), Gürsu Keleş and Tandoğan Polat The Quarterly Review of Economics and Finance, 2017, vol. 63, issue C, 185-192 Abstract: In this paper, we propose a novel way to calculate the relative liquidity premium between the nominal and inflation-indexed government bonds. We assume that both nominal and inflation-indexed bonds contain liquidity premium. Moreover, the methodology that is used in the paper does not need survey data to extract changes in the long-run inflation expectations. Hence, we can report the changes in the long-run inflation expectations on a daily basis. We apply this methodology to the Turkish bond market data. Results of the paper indicate the existence of a relative liquidity premium that takes values between -31 basis points and 43 basis points for the period between October 2012 and November 2015. This result also shows that the inflation-indexed bonds sometimes can be more liquid than nominal bonds in Turkey. Keywords: Breakeven inflation; Inflation expectations; Liquidity premium; Inflation risk premium; C32; E31; E43; E52; G12 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:63:y:2017:i:c:p:185-192 DOI: 10.1016/j.qref.2016.04.002 Access Statistics for this article The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty More articles in The Quarterly Review of Economics and Finance from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.