Term Structures of Inflation Expectations and Real Interest Rates

Forthcoming in Journal of Economic Business and StatisticsACS_figure

I use a statistical model to combine various surveys to produce a term structure of inflation expectations — inflation expectations at any horizon — and an associated term structure of real interest rates. Inflation expectations extracted from this model track realized inflation quite well, and in terms of forecast accuracy, they are at par with or superior to some popular alternatives. The real interest rates obtained from the model follow TIPS rates as well.

First draft  : August 2014

Federal Reserve Bank of Philadelphia is producing ATSIX (Aruoba Term Structure of Inflation Expectations) based on this paper.

Paper

Federal Reserve Bank of Minneapolis Staff Report [August 2014]

Federal Reserve Bank of Philadelphia Working Paper [March 2016]

Most Recent Working Paper  [January 2018]

Press and Blog Mentions

Econ Browser [May 2016]

Additional Materials

Movie of Inflation Expectations (1992-2015)

Maryland Center for Economics and Policy (MCEP) Summary