scholarly journals What Was the Market's View of U.K. Monetary Policy? Estimating Inflation Risk and Expected Inflation with Indexed Bonds

1998 ◽  
Author(s):  
Eli M. Remolona ◽  
Michael R. Wickens ◽  
Frank F. Gong
Keyword(s):  
Monetary Policy ◽  
Inflation Risk ◽  
Indexed Bonds ◽  
Expected Inflation

scholarly journals A New Approach to Gauging Inflation Expectations

2009 ◽  
pp. 1-4
Author(s):  
Joseph G. Haubrich
Keyword(s):  
Interest Rates ◽  
Risk Premium ◽  
New Method ◽  
Inflation Expectations ◽  
Real Interest Rates ◽  
Inflation Risk ◽  
New Approach ◽  
Expected Inflation ◽  
Inflation Risk Premium

This Economic Commentary explains a relatively new method of uncovering inflation expectations, real interest rates, and an inflation-risk premium. It provides estimates of expected inflation from one month to 30 years, an estimate of the inflation-risk premium, and a measure of real interest rates, particularly a short (one-month) rate, which is not readily available from the TIPS market. Calculations using the method suggest that longer-term inflation expectations remain near historic lows. Furthermore, the inflation-risk premium is also low, which in the model means that inflation is not expected to deviate far from expectations.

Estimating the New Keynesian Phillips Curve for the UK: evidence from the inflation-indexed bonds market

2017 ◽  
Vol 18 (1) ◽  
Author(s):  
Hardik A. Marfatia
Keyword(s):  
Phillips Curve ◽  
New Keynesian ◽  
Inflation Expectations ◽  
New Keynesian Phillips Curve ◽  
Indexed Bonds ◽  
Unobserved Component ◽  
Expected Inflation ◽  
Component Approach ◽  
Unobserved Component Model ◽  
The Uk

Abstract This paper utilizes the information in the inflation-indexed bonds market to estimate the New Keynesian Phillips Curve for the UK using an unobserved component approach. The main advantage of this approach comes from using the Kalman filter to explicitly estimate the unobserved expected inflation from the observed break-even inflation rates – the yield difference between the inflation-indexed bonds and the nominal bonds. Our results show that the expected inflation estimated from the unobserved component model plays a significant role in explaining the inflation dynamics in the UK. The evidence also suggests that the estimated inflation expectations are better able to capture the evolution of actual inflation process as compared to the break-even inflation rate as a proxy for expected inflation.

scholarly journals Inflation Risk and Optimal Monetary Policy

2007 ◽  
Author(s):  
William T. Gavin ◽  
Benjamin D. Keen ◽  
Michael R. Pakko
Keyword(s):  
Monetary Policy ◽  
Optimal Monetary Policy ◽  
Inflation Risk

A NOTE ON TIME VARIATION IN A FORWARD-LOOKING MONETARY POLICY RULE: EVIDENCE FROM EUROPEAN COUNTRIES

2012 ◽  
Vol 16 (S3) ◽  
pp. 422-437 ◽  
Author(s):  
N. Kundan Kishor
Keyword(s):  
Monetary Policy ◽  
Time Variation ◽  
Monetary Economics ◽  
Time Varying ◽  
Reaction Functions ◽  
The United Kingdom ◽  
Expected Inflation ◽  
Time Varying Parameter ◽  
Monetary Policy Reaction Functions ◽  
Forward Looking

This paper estimates time-varying forward-looking monetary policy reaction functions for the central banks of France, Germany, Italy, and the United Kingdom. We utilize the framework developed by Kim [Economics Letters91 (2006) 21–26] and Kim and Nelson [Journal of Monetary Economics(2006) 1949–1966] to deal with the issue of endogeneity in a time varying–parameter model. Our results find substantial time variation in the conduct of monetary policy in these four countries, which cannot be adequately captured by the conventional fixed-coefficient approach. Our findings suggest that there was a significant decline in the Bank of France's and the Bank of Italy's response to the German interest rate in 1992, and it coincided with the breakdown of the exchange rate management system in Europe. Our results suggest that the Bank of England was slower than the Bundesbank to increase its response to expected inflation, as its response to inflation became more than one-for-one only in the early 1980s.

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