Long-term bond prices may not reflect true value, impacting economic decisions.
The article explains how bond prices are influenced by factors like inflation expectations and interest rates. It uses a theory called consumption-based bond pricing to show how these factors affect bond prices. The theory is based on the ideas of Robert Lucas and Irving Fisher. The study finds that bond prices can be higher or lower than expected due to factors like inflation risk and future interest rate expectations. This information is important for organizations like the Federal Reserve to understand the economy better.