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Market-implied inflation and growth rates adversely affected by the Brent

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Abstract

The inflation and the real yield component deduced from inflation-linked and nominal bond prices are adversely affected by two market effects: price distortions due to certain market-related events and oil price movements. Their underlying time correlation without those effects is stable and positive. Market data analysis carried out on the world’s major bond markets gives valuable new insight into the long-debated relationship between inflation and growth prospects.

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Notes

  1. Japan has not been retained for this reason. This country started issuing inflation-linked bonds in 2004 and has suspended its program in 2008 until further notice. See http://www.mof.go.jp for press releases by the Ministry of Finance.

  2. Common movements are obtained, both for ΔRBY and ΔBEIR, by regressing on time-fixed effects. The idiosyncratic components are the residuals of the regressions. Consequently, the common correlation, in matrix b, is identical for all countries and cross-combinations.

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Authors and Affiliations

  1. Amundi Asset Management, 90 Boulevard Pasteur, CS21564, 75730, Paris

    Marielle de Jong

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  1. Gilbert Cette
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  2. Marielle de Jong
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Correspondence to Marielle de Jong.

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The views expressed in this article are those of the authors and do not necessarily reflect those of the Banque de France or Amundi.

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Cette, G., de Jong, M. Market-implied inflation and growth rates adversely affected by the Brent. J Asset Manag 14, 133–139 (2013). https://doi.org/10.1057/jam.2013.10

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  • DOI: https://doi.org/10.1057/jam.2013.10

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