Public pensions are indexed to prices or wages or to their combinations; therefore, the impact of inflation on the real … value of benefits can often be neglected, especially under indexation to prices. At high and accelerating …/decelerating inflation like currently prevailing in Hungary, however, this is not the case. (i) With fast inflation of basic necessities …

an indexation lag, and the term structure of expected inflation. Unlike prior studies, the model’s parameters are … representing the short-term real interest rate, expected inflation, inflation’s central tendency, and four volatility factors that … follow GARCH processes. We derive analytical solutions for nominal bond yields, yields on inflation-indexed bonds that have …