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The Impact of Unanticipated Inflation on Long-Term Treasury Bills

Sharafuddin, Sepehr LU and Olsson, Axel LU (2015) BUSP70 20151
Department of Business Administration
Abstract
The impact of inflation on Treasury bills has not been studied for many years and hence the effects in modern time are unclear. The long term interest rates are theoretically more difficult to influence as future expectations needs to be changed. This study hence aims to mainly examine the effects of unanticipated inflation on the U.S. treasury bills but also the effects which unanticipated money supply has as a complementary part. An event study methodology has been used to conduct the research, which is the standard in previous studies. The results show that the unanticipated inflation announcements in the form of PPI have a significant positive impact on the sample from 1990-2015 whilst CPI has no impact. The reason for this is assumed... (More)
The impact of inflation on Treasury bills has not been studied for many years and hence the effects in modern time are unclear. The long term interest rates are theoretically more difficult to influence as future expectations needs to be changed. This study hence aims to mainly examine the effects of unanticipated inflation on the U.S. treasury bills but also the effects which unanticipated money supply has as a complementary part. An event study methodology has been used to conduct the research, which is the standard in previous studies. The results show that the unanticipated inflation announcements in the form of PPI have a significant positive impact on the sample from 1990-2015 whilst CPI has no impact. The reason for this is assumed to be the early announcements of PPI compared to CPI. When examining the results Pre and Post the global financial crisis a clear difference can be seen. The large difference is assumed to exist because of the strong and persistent regulatory interventions form the government. The Results also show that money supply has no impact on the long-term treasury bills in this sample. (Less)
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author
Sharafuddin, Sepehr LU and Olsson, Axel LU
supervisor
organization
course
BUSP70 20151
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Treasury-bill, Event study, Inflation
language
English
id
7511501
date added to LUP
2015-09-15 16:18:27
date last changed
2015-09-15 16:18:27
@misc{7511501,
  abstract     = {The impact of inflation on Treasury bills has not been studied for many years and hence the effects in modern time are unclear. The long term interest rates are theoretically more difficult to influence as future expectations needs to be changed. This study hence aims to mainly examine the effects of unanticipated inflation on the U.S. treasury bills but also the effects which unanticipated money supply has as a complementary part. An event study methodology has been used to conduct the research, which is the standard in previous studies. The results show that the unanticipated inflation announcements in the form of PPI have a significant positive impact on the sample from 1990-2015 whilst CPI has no impact. The reason for this is assumed to be the early announcements of PPI compared to CPI. When examining the results Pre and Post the global financial crisis a clear difference can be seen. The large difference is assumed to exist because of the strong and persistent regulatory interventions form the government. The Results also show that money supply has no impact on the long-term treasury bills in this sample.},
  author       = {Sharafuddin, Sepehr and Olsson, Axel},
  keyword      = {Treasury-bill,Event study,Inflation},
  language     = {eng},
  note         = {Student Paper},
  title        = {The Impact of Unanticipated Inflation on Long-Term Treasury Bills},
  year         = {2015},
}