Inflation and Asset Returns / Anna Cieslak, Carolin Pflueger.

Format:

Book

Author/Creator:

Cieslak, Anna.

Contributor:

National Bureau of Economic Research.

Pflueger, Carolin.

Series:

Working Paper Series (National Bureau of Economic Research) no. w30982.

NBER working paper series no. w30982

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

The past half-century has seen major shifts in inflation expectations, how inflation comoves with the business cycle, and how stocks comove with Treasury bonds. Against this backdrop, we review the economic channels and empirical evidence on how inflation is priced in financial markets. Not all inflation episodes are created equal. Using in a New Keynesian model, we show how "good" inflation can be linked to demand shocks and "bad" inflation to supply shocks driving the economy. We then discuss asset pricing implications of "good" and "bad" inflation. We conclude by providing an outlook for inflation risk premia in the world of newly rising inflation.

Notes:

Print version record

March 2023.