A Copula Approach to Backward-Looking Factors in Market Based Inflation Expectations

Piotr Płuciennik () and Magdalena Szyszko ()
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Piotr Płuciennik: Adam Mickiewicz University in Poznań
Magdalena Szyszko: WSB University in Poznan

A chapter in Contemporary Trends and Challenges in Finance, 2017, pp 69-77 from Springer

Abstract: Abstract The paper presents an analysis of the dependences between inflation expectations extracted from inflation-linked swaps quoted for EUR and three other variables: exchange rate, oil prices and interbank rate. To determine the existence of the dependences, also for the outliners, the methodology based on the DCC-t-copula model is applied. Time span covers 2009–2015. Dynamic Kendall’s τ and tail dependence coefficients for 2Y expectations prove to be negligible and counterintuitive. The explanations of the results can be found in the swap market features (illiquidity and negative inflation risk premium for some time) and the measure of expectations applied (being just the approximation of the expectations, highly volatile for daily quotations).

Keywords: Exchange Rate; Monetary Policy; Central Bank; Inflation Expectation; Tail Dependence Coefficient (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-319-54885-2_7

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DOI: 10.1007/978-3-319-54885-2_7

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