The TIPS yield curve and inflation compensation
Date
2010
Authors
Gürkaynak, R. S.
Sack, B.
Wright, J. H.
Editor(s)
Advisor
Supervisor
Co-Advisor
Co-Supervisor
Instructor
Source Title
American Economic Journal : Macroeconomics
Print ISSN
1945-7707
Electronic ISSN
1945-7715
Publisher
American Economic Association
Volume
2
Issue
1
Pages
70 - 92
Language
English
Type
Journal Title
Journal ISSN
Volume Title
Series
Abstract
For over ten years, the Treasury has issued index-linked debt. This paper describes the methodology for fitting a smoothed yield curve to these securities that is used at the Federal Reserve Board every day, and makes the estimates public. Comparison with the corresponding nominal yield curve allows measures of inflation compensation to be computed. We discuss the interpretation of inflation compensation, and provide evidence that it is not a pure measure of inflation expectations being distorted by inflation risk premium and liquidity premium components. We attempt to estimate the TIPS liquidity premium and to extract underlying inflation expectations. (JEL E31, E43, H63)