Quotation Geyer, Alois, Hanke, Michael, Weissensteiner, Alex. 2016. Inflation Forecasts Extracted from Nominal and Real Yield Curves. Quarterly Review of Economics and Finance 60 (May), 180-188.


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Abstract

The aim of this paper is to evaluate the performance of inflation forecasts backed out from the nominal and real yield curves in the United Kingdom. We use the Nelson–Siegel (NS) framework to model the break-even inflation term structure, and we base our analysis on the one-day break-even inflation derived from NS factors, which avoids the need for a direct estimation of the inflation risk premium. Fitting (vector) autoregression models augmented with nominal and/or real Cochrane-Piazzesi factors, we find that parsimonious models based on the one-day break-even inflation outperform other models in forecasting inflation out-of-sample. In addition, we quantify the parameter uncertainty and show that it may have considerable impact on inflation forecasts.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Quarterly Review of Economics and Finance
WU Journalrating 2009 A
WU-Journal-Rating new FIN-A, STRAT-B, VW-D, WH-B
Language English
Title Inflation Forecasts Extracted from Nominal and Real Yield Curves
Volume 60
Number May
Year 2016
Page from 180
Page to 188
Reviewed? Y
URL http://www.sciencedirect.com/science/article/pii/S1062976915000927
DOI http://dx.doi.org/10.1016/j.qref.2015.10.002
JEL E31; E37; E43; G01; G17

Associations

Projects
Modeling inflation based on nominal and real bond yields
People
Geyer, Alois (Details)
External
Hanke, Michael
Weissensteiner, Alex
Organization
Institute for Financial Research IN (Details)
Competence Center for Empirical Research Methods WE (Details)
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