ESTIMATING INFLATION RISK PREMIA USING INFLATION-LINKED BONDS: A REVIEW

Abstract

This paper provides an overview of studies that estimate the inflation risk premium using inflation-linked bond (ILB) yields. I categorize existing studies, outline their research designs and compare their estimates for the inflation risk premium. Furthermore, the importance of accounting for ILB illiquidity and an overview of existing ILB liquidity proxies are demonstrated. A discussion of current literature developments, such as the zero lower bound, and an outline for future research directions conclude the paper.