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Finance and Economics Discussion Series: Deriving Inflation Expectations from Nominal and Inflation-Indexed Treasury Yields

by Brian Sack , United States Federal Reserve Board
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Current price ₹1,428.00
Original price ₹1,544.00
Original price ₹1,544.00
Original price ₹1,544.00
(-8%)
₹1,428.00
Current price ₹1,428.00

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Book cover type: Paperback
  • ISBN13: 9781288716999
  • Binding: Paperback
  • Subject: N/A
  • Publisher: Bibliogov
  • Publisher Imprint: Bibliogov
  • Publication Date:
  • Pages: 28
  • Original Price: USD 15.75
  • Language: English
  • Edition: N/A
  • Item Weight: 68 grams
  • BISAC Subject(s): General

This paper derives a measure of inflation compensation from the yields of a Treasury inflation-indexed security and a portfolio of STRIPS that has similar liquidity and duration as the indexed security. This measure can be used as a proxy for inflation expectations if the inflation risk premium is small. The calculated measure suggests that the rate of inflation expected over the next ten years fell from just under 3% in mid-1997 to just under 1 3/4% by early 1999, before rising back to about 2 1/2% by the beginning of 2000. This variation is more extensive than would have been expected from a simple model of inflation dynamics or from a survey measure of long-run inflation expectations.

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