The thesis consists in two papers exploiting thorughly the inflation-indexed bond markets in the Eurozone. In the first paper, after presenting some empirical stylized facts about the European sovereign inflation-indexed markets we address the effectiveness of nominal and real rational expectation hypothesis and of inflation-expectation hypothesis. Then, we document the existence of a liquidity premium and of a default premium for France, Italy and Germany, moving from a market based measure of inflation. The second paper is about yield curve modeling and forecasting. We provide a threefactor yield curve model delivering estimates for nominal term structure of France, Germany and Italy, from January 2000 to December 2016 and for real term structure of France and Italy from July 2003 to December 2016. The framework is the latent factor model with time varying level, slope and curvature. The overall fitting performances is good and the identification is consistent with many shapes assumed by the term structure. After the empirical estimation we forecast the yield curve by forecasting the factors and we compare them with several standard competitors. Lastly, we document for the first time a significant liquidity issue on short-term real bond spreads and of a default premium affecting more heavily real spreads as compared to nominal across various maturities.
INFLATION-INDEXED BONDS IN THE EUROZONE
SORBO, JACOPO
2017
Abstract
The thesis consists in two papers exploiting thorughly the inflation-indexed bond markets in the Eurozone. In the first paper, after presenting some empirical stylized facts about the European sovereign inflation-indexed markets we address the effectiveness of nominal and real rational expectation hypothesis and of inflation-expectation hypothesis. Then, we document the existence of a liquidity premium and of a default premium for France, Italy and Germany, moving from a market based measure of inflation. The second paper is about yield curve modeling and forecasting. We provide a threefactor yield curve model delivering estimates for nominal term structure of France, Germany and Italy, from January 2000 to December 2016 and for real term structure of France and Italy from July 2003 to December 2016. The framework is the latent factor model with time varying level, slope and curvature. The overall fitting performances is good and the identification is consistent with many shapes assumed by the term structure. After the empirical estimation we forecast the yield curve by forecasting the factors and we compare them with several standard competitors. Lastly, we document for the first time a significant liquidity issue on short-term real bond spreads and of a default premium affecting more heavily real spreads as compared to nominal across various maturities.File | Dimensione | Formato | |
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https://hdl.handle.net/20.500.14242/82043
URN:NBN:IT:UNIMI-82043