An assessment of recent trends in market-based expected iflation in the euro area
Marcello Pericoli ()
No 542, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area
This paper presents estimates of expected inflation and the inflation risk premium in the euro area inferred from asset prices. A model is developed that exploits both nominal and real bond yields, corrects for market liquidity and anchors expected inflation using survey-based expectation, The resulting estimate of long-term expected inflation fluctuates over time and declines sensibly starting in late 2018. By contrast, expected inflation estimated using inflation swap yields remains roughly unchanged throughout the whole sample period.
Keywords: affine term structure model; expected inflation; inflation risk premium (search for similar items in EconPapers)
JEL-codes: C32 E43 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-mac and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_542_19
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