Search Results
Working Paper
Forecasts of inflation and interest rates in no-arbitrage affine models
In this paper, we examine the forecasting ability of an affine term structure framework that jointly models the markets for Treasuries, inflation-protected securities, inflation derivatives, and oil future prices based on no-arbitrage restrictions across these markets. On the methodological side, we propose a novel way of incorporating information from these markets into an affine model. On the empirical side, two main findings emerge from our analysis. First, incorporating information from inflation options can often produce more accurate inflation forecasts than those based on the Survey of ...
Journal Article
The Dynamics of Long-Run Inflation Expectations: A Market-Based Perspective
This article analyzes market-based probability distributions for long-run inflation expectations derived from inflation derivatives. We construct forward-looking distributions for five-year-ahead inflation to assess the likelihood that inflation will fall above, below, or near the Federal Reserve’s 2 percent target. By examining the mean, volatility, and skewness of these distributions, we document how expectations have evolved since the onset of the COVID-19 pandemic. To assess the reliability of market-based measures, we compare our results with alternative data sources. We highlight the ...