Recently a market in options based on consumer price index inflation (inflation caps and floors) has emerged in the US. This paper uses quotes on these derivatives to construct probability densities for inflation. We study how these probability density functions respond to news announcements and...

This paper studies the equilibrium term structure of nominal and real interest rates and the time-varying bond risk premia implied by a stochastic endogenous growth model with imperfect price adjustment and monetary policy shocks. The production and price-setting decisions of firms drive...

Economists have traditionally viewed futures prices as fully informative about future economic activity and asset prices. We argue that open interest could be more informative than futures prices in the presence of hedging demand and limited risk absorption capacity in futures markets. We find...