New answers tagged inflation
Applied Intermediate Macroeconomics by Hoover has some good information on this, see pg. 600. The word to look for is NAIRU, non-accelerating inflation rate of unemployment, but most call it the "natural rate of unemployment". Taking the equation 15.11 in the book as the base, the following relation can be shown between change in inflation rate and ...
Typically one only thinks about inflation delta in the context of an inflation derivatives portfolio. Then it is the sensitivity to a 1bp change in the zero coupon inflation rate for each maturity. As others have mentioned, regular bonds are sensitive to inflation. However we typically describe that risk as a risk to nominal interest rates, rather than ...
I'm ot sure if it's the answer you're looking for but one commonly used method in practice is to simply take a long term average of the unemployment rate. The long term in this context means a period which covers exactly a full business cycle (either peak to peak or trough to trough). FYI. US business cycle dates can be found here (http://www.nber.org/...
Inflation delta is typically used in the field of fixed income and is defined as sensitivity of the the present value of cash flows to the changes in the inflation curve. In business it is used to measure the inflation risk in the portfolio relative to the liabilities.
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