Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153168
Authors: 
Hördahl, Peter
Tristani, Oreste
Year of Publication: 
2007
Series/Report no.: 
ECB Working Paper 734
Abstract: 
This paper estimates the size and dynamics of inflation risk premia in the euro area, based on a joint model of macroeconomic and term structure dynamics. Information from both nominal and index-linked yields is used in the empirical analysis. Our results indicate that term premia in the euro area yield curve reflect pre-dominantly real risks, i.e. risks which affect the returns on both nominal and index-linked bonds. On average, inflation risk premia were negligible during the EMU period but, occasionally, subject to statistically significant fluctuations in 2004-2006. Movements in the raw break-even rate appear to have mostly reflected such variations in inflation risk premia, while long-term inflation expectations have remained remarkably anchored from 1999 to date.
Subjects: 
central bank credibility
ination risk premia
Term structure of interest rates
JEL: 
E43
E44
Document Type: 
Working Paper

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