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Macroeconomic Drivers of Inflation Expectations and Inflation Risk Premia

Jef Boeckx et al.

Journal of Financial Econometrics2025https://doi.org/10.1093/jjfinec/nbae032article
AJG 3ABDC A*
Weight
0.41

Abstract

We propose a new affine term structure model to decompose inflation-linked swap (ILS) rates into genuine inflation expectations and inflation risk premia. The model accounts for both short-term macroeconomic factors and long-term economic trends, namely trend inflation and the equilibrium real interest rate. We estimate the model for the US and euro area and find that the inflation risk premium significantly drives ILS rates, with macroeconomic shocks playing different roles across maturities and regions. International factors, particularly oil prices, impact market-based inflation expectations during key global events like the COVID-19 pandemic and the Russian invasion of Ukraine.

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https://doi.org/https://doi.org/10.1093/jjfinec/nbae032

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@article{jef2025,
  title        = {{Macroeconomic Drivers of Inflation Expectations and Inflation Risk Premia}},
  author       = {Jef Boeckx et al.},
  journal      = {Journal of Financial Econometrics},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1093/jjfinec/nbae032},
}

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Macroeconomic Drivers of Inflation Expectations and Inflation Risk Premia

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Evidence weight

0.41

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.25 × 0.4 = 0.10
M · momentum0.55 × 0.15 = 0.08
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.