A0507
Title: Real uncertainty and the zero lower bound
Authors: Guillaume Roussellet - McGill University (Canada) [presenting]
Abstract: Both term structures of U.S. nominal and inflation-linked bonds are used to identify real uncertainty and the associated risk premia, in and out of the zero lower bound (ZLB). Regression analyses are first used to provide stylized facts on real term and inflation risk premia, and to derive new Fama conditions. We propose a ZLB-consistent affine pricing model for both term structures, encompassing simultaneously flexible inflation dynamics and providing non-negative nominal yields. We extract risk premia components, showing their consistency with the stylized facts. Decomposing the sources of real uncertainty, we document that although short-term inflation uncertainty is high at the ZLB, the predictability of nominal and real excess-returns is improved during this period.
