Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/130664
Authors: 
D'Amico, Stefania
Orphanides, Athanasios
Year of Publication: 
2014
Series/Report no.: 
Working Paper, Federal Reserve Bank of Chicago 2014-24
Abstract: 
This paper examines the relation between variations in perceived inflation uncertainty and bond premia. Using the subjective probability distributions available in the Survey of Professional Forecasters we construct a quarterly time series of average individual uncertainty about inflation forecasts since 1968. We show that this ex-ante measure of inflation uncertainty differs importantly from measures of disagreement regarding inflation forecasts and other proxies, such as model-based ex-post measures of macroeconomic risk. Inflation uncertainty is an important driver of bond premia, but the relation varies across inflation regimes. It is most important in the high-inflation regime early in the sample and the low-inflation regime over the last 15 years. Once the role of inflation uncertainty is accounted for, disagreement regarding inflation forecasts appears a much less important driver of bond premia.
Subjects: 
survey expectations
probabilistic forecasts
heterogeneity
inflation uncertainty
bond risk premia
JEL: 
E37
E44
E47
C53
G12
Document Type: 
Working Paper

Files in This Item:
File
Size
256.23 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.