DP7250 Inflation Risk Premia and Survey Evidence on Macroeconomic Uncertainty

Author(s): Paul Söderlind
Publication Date: April 2009
Keyword(s): break-even inflation, liquidity premium, Survey of Professional Forecasters
JEL(s): E27, E47
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=7250

Nominal and real U.S. interest rates (1997Q1-2008Q2) are combined with inflation expectations from the Survey of Professional Forecasters to calculate time series of risk premia. It is shown that survey data on inflation and output growth uncertainty, as well as a proxy for liquidity premia can explain a large amount of the variation in these risk premia.