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Inflation expectation and implicit inflation: does market research provide accurate measures?

Author

Listed:
  • Flávio de Freitas Val

    (Central Bank)

  • Claudio Henrique da Silveira Barbedo

    (IBMEC)

  • Marcelo Verdini Maia

    (IAG/PUC-RIO)

Abstract

In recent years bonds indexed to inflation rates have experienced a tremendous growth in trading volumes. These securities have become an important tool for the diversification of investors' portfolios, to liability management and especially to gauge the expectations of monetary authorities. In this environment, this study contributes as it presents an amended methodology to estimate the inflation risk premium and in applying different methodologies in the Brazilian market. The results indicate that implicit inflation measures with or without adjustment of the inflation risk premium return the smallest forecast errors in relation to the IPCA of measurement period.

Suggested Citation

  • Flávio de Freitas Val & Claudio Henrique da Silveira Barbedo & Marcelo Verdini Maia, 2011. "Inflation expectation and implicit inflation: does market research provide accurate measures?," Brazilian Business Review, Fucape Business School, vol. 8(3), pages 83-100, July.
    • Handle: RePEc:bbz:fcpbbr:v:8:y:2011:i:3:p:83-100
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    References listed on IDEAS

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