Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/101091 
Year of Publication: 
2014
Series/Report no.: 
Working Papers in Economics and Statistics No. 2014-05
Publisher: 
University of Innsbruck, Research Platform Empirical and Experimental Economics (eeecon), Innsbruck
Abstract: 
The sovereign's intention to issue inflation-linked bonds (ILB) is to save money. More than 15 years' experience with this financial instrument in the United States and in several other countries has led to the conclusion that these bonds are costly and basically characterized by low liquidity issues. Recently, various papers have started to analyze the impact of liquidity on ILB yields. This paper summarizes studies concerning ILB liquidity at a glance and adds a new estimation strategy of the liquidity premium based on Campbell & Shiller's (1996) hypothetical ILB yields. We calculate the difference between observed and hypothetical ILB yields, regress this time series on a set of ILB-specific liquidity as well as general market uncertainty measures and find statistically and economically significant effects of the liquidity measures for the United States, the United Kingdom and Canada.
Subjects: 
Inflation-linked bonds
liquidity
hypothetical yields
JEL: 
G12
G01
H63
Document Type: 
Working Paper

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