Inflation, real interest rates, and the bond market: a study of UK nominal and index-linked government prices

Article Abstract:

A transparent framework was applied to index-linked bonds and conventional bonds of the United Kingdom to establish empirically acceptable and statistically accurate assessments of forward rate and yield curves. Results from the application revealed a possible decomposition of prospective nominal rates into subsequent real rates and inflation. The estimated real interest rates exhibit high variability at short horizons but are relatively stable at long horizons. Fluctuations in expected inflation and real rates show high negative correlation at short horizons only.

Economics, Research and Development in the Social Sciences and Humanities, United Kingdom, Prices and rates, Inflation (Finance), Government securities, Inflation (Economics), Inflation-indexed bonds, Inflation indexed bonds

---

The liquidity premium and average interest rates

Article Abstract:

An analysis of the liquidity premium in average interest rates is presented. The analysis focuses on rate determination and considers a model where money is positively correlated with output and negatively correlated with interest rates, where such assumptions factor in the possibility of empirical regularities. It is shown that the systematic relationship between monetary shocks and output condition average real short-term interest rate.

Liquidity (Finance)

---

The persistence of real interest differentials

Article Abstract:

A study of real interest differentials is presented. The study applies Kalman filtering to measure ex ante real interest differentials. Data is taken from the period covering 1973-1987. It is shown that differentials for the given period are relatively short-lived and mean reverting to zero. The results validate theoretical models describing economic interdependence and real rate equality in long-run terms.

Usage, Kalman filtering

Similar abstracts:

• Abstracts: Contractual incompleteness and the optimality of equity joint ventures. Organizational communication structure and performance
• Abstracts: Growth opportunities, corporate governance and the market value of multinational joint ventures. Just-Cause Provisions, Severance Pay, and the Efficiency Wage Hypothesis
• Abstracts: Institutional investors and corporate monitoring: a demand-side perspective. Monitoring costs as a basis for the dispersion of firm ownership
• Abstracts: Deviations from purchasing power parity and capital flows. Animal spirits, investment and international capital movements
• Abstracts: A multivariate cointegration analysis of interest rates in the Eurocurrency market. Balance of trade announcements and asset prices: influence on equity prices, exchange rates, and interest rates

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.