Template-type: ReDIF-Paper 1.0
Author-Name: Dr. Petra Gerlach
Author-Name-First: Petra
Author-Name-Last: Gerlach
Author-Person: pge202
Author-Name: Richhild Moessner
Author-Name-First: Richhild
Author-Name-Last: Moessner
Author-Name: Dr. Rina Rosenblatt-Wisch
Author-Name-First: Rina
Author-Name-Last: Rosenblatt-Wisch
Author-Person: pro392
Title: Computing long‐term market inflation expectations for countries without inflation expectation markets
Abstract: We  derive  daily  market‐based  domestic long‐term  inflation  expectations  for  eight  countries  without  inflation swap markets. To do so, we use foreign inflation swaps together with (1) foreign and domestic interest rate swaps assuming that purchasing power parity (PPP) and uncovered interest rate parity (UIP) hold or together with (2) spot and forward exchange rates assuming that PPP, UIP and covered interest rate  parity (CIP) hold. We  confirm  the  plausibility of our PPP‐UIP  and  PPP‐UIC‐CIP  measures by also  applying these methods for countries with inflation swap markets. We moreover illustrate how the data can be used to answer such questions as whether inflation reacts to long‐term inflation expectations, whether these expectations are well‐anchored and how long‐term real interest rates have moved over the past decade.
Length: 35 pages
Creation-Date: 2017
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2017/working_paper_2017_09
File-Format: text/html
Number: 2017-09
Classification-JEL: E31, E44, E58
Keywords: Inflation expectations, market‐based inflation expectations, anchoring of inflation expectations, long‐term real interest rates
Handle: RePEc:snb:snbwpa:2017-09