Ajello, Andrea; Benzoni, Luca; Chyruk, Olena - 2014 - This version: December 19, 2012
We propose a no-arbitrage model that jointly explains the dynamics of consumer prices as well as the nominal and real term structures of risk-free rates. In our framework, distinct core, food, and energy price series combine into a measure of total inflation to price nominal Treasuries. This...