Modeling and estimating the dynamics of expected inflation

2017 Fiscal Year Final Research Report

• Project/Area Number: 15K03538
• Research Category: Grant-in-Aid for Scientific Research (C)
• Allocation Type: Multi-year Fund
• Section: 一般
• Research Field: Money/ Finance
• Research Institution: Hitotsubashi University
• Principal Investigator: TAKAMIZAWA Hideyuki 一橋大学, 大学院商学研究科, 准教授 (60361854)
• Project Period (FY): 2015-04-01 – 2018-03-31
• Keywords: インフレ / 期待 / リスクプレミアム / 均衡モデル / 資産価格モデル / 金利期間構造 / 配当期間構造

Outline of Final Research Achievements

This research project proposes an equilibrium model of bonds and equities that incorporates information on expected inflation and estimates the model to elicit expected inflation and uncover its dynamics. The proposed model extends existing models in that preference parameters of a utility function depend on state variables of the economy and asset markets. It exhibits a high descriptive ability about term structures of bonds and equities. However, it obtains unrealistic economic implications such that when the risk aversion is set at 30 (which is acceptable compared with the previous work), the volatility of consumption growth rate exceeds 8% per year, which is too high. The model is extended by incorporating disaster risks into consumption and divided processes with a slight modification of parameter values. It then provides reasonable economic implications about risk aversion and consumption volatility without losing the statistical fit.

Free Research Field

計量ファイナンス、資産価格論