This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. Journals
  3. American Economic Review
  4. June 2011
  5. Term Premia and Inflation Uncertainty: Empirical Evidence from an International Panel Dataset

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Term Premia and Inflation Uncertainty: Empirical Evidence from an International Panel Dataset

  • Jonathan H. Wright
American Economic Review
vol. 101, no. 4, June 2011
(pp. 1514–34)
Download Full Text PDF

Abstract

This paper provides cross-country empirical evidence on term premia. I construct a panel of zero-coupon nominal government bond yields spanning ten industrialized countries and nearly two decades. I hence compute forward rates and use two different methods to decompose these forward rates into expected future short-term interest rates and term premiums. The first method uses an affine term structure model with macroeconomic variables as unspanned risk factors; the second method uses surveys. I find that term premiums declined internationally over the sample period, especially in countries that apparently reduced inflation uncertainty by making substantial changes in their monetary policy frameworks. (JEL E13, E43, E52, G12, H63)

Citation

Wright, Jonathan H. 2011. "Term Premia and Inflation Uncertainty: Empirical Evidence from an International Panel Dataset." American Economic Review, 101 (4): 1514–34. DOI: 10.1257/aer.101.4.1514

Additional Materials

JEL Classification

  • E31 Price Level; Inflation; Deflation
  • E43 Interest Rates: Determination, Term Structure, and Effects
  • E52 Monetary Policy
  • G12 Asset Pricing; Trading volume; Bond Interest Rates
  • H63 National Debt; Debt Management; Sovereign Debt