New Measures for Inflation Uncertainty and Disagreement from Treasury Auctions: Alternative to Surveys

ABSTRACT

In this article, we propose a novel methodology to construct new uncertainty and disagreement measures for the long-term inflation rate with the use of micro data of Treasury auctions. We employ individual bids submitted in Treasury auctions for nominal and inflation indexed bonds. We argue that these newly formed indicators do not have the problems associated with the survey and market-based uncertainty and disagreement measures. We also focus on the interactions of our proposed measures for inflation rate by comparing the measures commonly used in the literature. The findings of this article are believed to enhance the effectiveness of policy-making by introducing new proxies for crucial economic variables and also by providing the opportunity for other emerging economies with inadequate surveys to construct historical uncertainty and disagreement measures for inflation rates.

KEY WORDS:

• fixed coupon bonds
• inflation disagreement
• inflation indexed bonds
• inflation uncertainty
• treasury auctions

JEL CLASSIFICATION:

• E31
• E37
• E43
• G12