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Marielle de Jong and Gilbert Cette
''The rocky ride of break-even inflation rates''
( 2008, Vol. 5 No.31 )
The correlation matrix between break-even inflation rate movements and real interest rate movements across several countries shows puzzling features. Correlation is significantly positive for nearly all cross-border pairs whereas it is nil, positive or negative unsystematically within countries. By means of a correlation matrix decomposition, we give an explanation for this puzzle.
Keywords: Inflation-linked bonds
JEL: E4 - Money and Interest Rates: General
Manuscript Received : Oct 17 2008 Manuscript Accepted : Oct 17 2008

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