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Federal Reserve Bank of Cleveland
Economic Commentary
Expected inflation and TIPS
Charles T. Carlstrom
Timothy S. Fuerst
Abstract

When inflation-indexed Treasury securities were first introduced, economists hoped that they could be used to measure expected inflation easily. The only difference between securities that were indexed to inflation and those that were not was thought to be the extra compensation regular securities had to pay for what the market thought inflation would be. By now it is pretty clear that inflation-indexed Treasuries differ from regular securities in other ways that show up in the yields. This Commentary suggests what these are and discusses a method of correcting for them.


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Charles T. Carlstrom & Timothy S. Fuerst, "Expected inflation and TIPS" , Federal Reserve Bank of Cleveland, Economic Commentary, issue Nov, 2004.
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Keywords: Government securities ; Inflation-indexed bonds
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