One of the commonly used estimates of expected inflation is the yield differential between nominal bonds and inflation-indexed bonds (breakeven inflation). Breakeven inflation is however a biased estimate of expected inflation because it includes an inflation risk premium (IRP). The novelty of...

Inflation expectations are a key economic variable for investors in capital markets and for economic policy decision makers. One of the widely used sources for deriving inflation expectations are market prices of bonds. The yield differential between nominal bonds and inflation-indexed (linked)...