Term Structures of Inflation Expectations and Real Interest Rates

70 Pages Posted: 24 Mar 2016

See all articles by S. Borağan Aruoba

S. Borağan Aruoba

University of Maryland - Department of Economics

Date Written: 2016-03-14

Abstract

Revised September 2016. In this paper, I use a statistical model to combine various surveys to produce a term structure of inflation expectations--inflation expectations at any horizon--and an associated term structure of real interest rates. Inflation expectations extracted from this model track realized inflation quite well, and in terms of forecast accuracy, they are at par with or superior to some popular alternatives. Looking at the period 2008.2015, I conclude that long-run inflation expectations remained anchored, and the policies of the Federal Reserve provided a large level of monetary stimulus to the economy.

Keywords: Surveys, TIPS, Inflation swaps, Unconventional monetary policy, Treasury Inflation-Protected Securities (TIPS)

JEL Classification: C32, E31, E43, E58

Suggested Citation

Aruoba, S. Boragan, Term Structures of Inflation Expectations and Real Interest Rates (2016-03-14). FRB of Philadelphia Working Paper No. 16-9, Available at SSRN: https://ssrn.com/abstract=2753996

S. Boragan Aruoba (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3508 (Phone)
301-405-3542 (Fax)

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