Federal Reserve Bank of Minneapolis
Term Structures of Inflation Expectations and Real Interest Rates: The Effects of Unconventional Monetary Policy
Inflation expectations have recently received increased interest because of the uncertainty created by the Federal Reserve’s unprecedented reaction to the Great Recession. The effect of this reaction on the real economy is also an important topic. In this paper I use various surveys to produce a term structure of inflation expectations – inflation expectations at any horizon from 3 to 120 months – and an associated term structure of real interest rates. Inflation expectations extracted from this model track actual (ex-post) realizations of inflation quite well, and in terms of forecast accuracy they are at par with or superior to some popular alternatives obtained from financial variables. Looking at the period 2008–2013, I conclude that the unconventional policies of the Federal Reserve kept long-run inflation expectations anchored and provided a large level of monetary stimulus to the economy.
Cite this item
S. Boragan Aruoba, Term Structures of Inflation Expectations and Real Interest Rates: The Effects of Unconventional Monetary Policy, Federal Reserve Bank of Minneapolis, Staff Report 502, 13 Aug 2014.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
Keywords: Inflation expectations; Real interest rate; Unconventional policies
This item with handle RePEc:fip:fedmsr:502
is also listed on EconPapers
For corrections, contact Jannelle Ruswick ()