Computing long‐term market inflation expectations for countries without inflation expectation markets

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

No 2017-09, Working Papers from Swiss National Bank

Abstract: 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 (1) foreign and domestic interest rate swaps assuming that purchasing power parity (PPP) and uncovered interest rate parity (UIP) hold or together with (2) 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)
Pages: 35 pages
Date: 2017
New Economics Papers: this item is included in nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Computing Long-Term Market Inflation Expectations for Countries without Inflation Expectation Markets (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:snb:snbwpa:2017-09

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