Download or read book Ex ante Real Rates and Inflation Risk Premiums written by Ayelet Balsam and published by . This book was released on 1998 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Real Interest Rates and Inflation written by Shmuel Kandel (deceased) and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a method of measuring ex-ante real interest rates using prices of index and nominal bonds. Employing this method and newly available data, we directly test the Fisher hypothesis that the real rate of interest is independent of inflation expectations. We find a negative correlation between ex-ante real interest rates and expected inflation. This contradicts the Fisher hypothesis but is consistent with the theories of Mundell and Tobin, Darby and Feldstein, and Stulz. We also find that nominal interest rates include an inflation risk premium that is positively related to a proxy for inflation uncertainty.
Download or read book Are Ex post Real Interest Rates a Good Proxy for Ex ante Real Rates written by Juan Ayuso and published by . This book was released on 1997 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Trabajo empírico sobre la valoración de activos financieros de acuerdo a un modelo estocástico intertemporal (CCAPM) tomando los datos de cuatro economías distintas: Francia, España, Reino Unido y USA.
Download or read book The Ex Ante Real Rate and Inflation Premium Under a Habit Consumption Model written by Leonardo Madureira and published by . This book was released on 2007 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes and quantifies ex ante components of bond yields - real rate of returns and risk premia - from observed prices of nominal and indexed bonds in the United Kingdom from 1983 to 2000. The estimation uses an asset pricing framework based on a habit consumption model together with a joint formulation of consumption growth and inflation. Nominal yields carry a time-varying inflation premium that is significant throughout the period, increasing in the bond's maturity and contributing up to 25 basis points to yearly nominal yields. The analysis allows the extraction of the ex ante real rate from indexed bonds by properly taking into account both the incomplete indexation on these instruments and the inflation premium embedded in the nominal bonds.
Download or read book Real Interest Rates Inflation and the Term Structure of Interest Rates written by Li-Hsueh Chen and published by . This book was released on 1998 with total page 248 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Inflation and Real Interest Rates on Assets with Different Risk Characteristics written by John Huizinga and published by . This book was released on 1984 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: Several recent studies find that ex ante real returns for short-term U.S. Treasury securities are negatively correlated both with inflation and with nominal interest rates. This paper examines whether these findings extend to the short-term holding return on publicly and privately issued securities of longer maturity, are robust with respect to the choice of price index, and are stable over time. Our results show that before 1979 a negative relationship of ex ante real returns with inflation and nominal interest rates does appear for the longer maturity assets. In fact, the relationship grows stronger with increases in maturity length. This suggests that although short-term U.S. Treasury bills were, of all the assets we study, the best hedge against expected inflation, none of the assets were a perfect hedge. We find a statistically significant change in the stochastic process of bond returns in 1979, with nominal interest rates and ex ante real holding returns being positively correlated in this latter period. This is not true for stocks, however. While the above results are robust to the choice of price index, we show that estimating the level of ex ante real returns depends crucially on the price index chosen.
Download or read book The Real Interest Rate written by Frederic S. Mishkin and published by . This book was released on 1981 with total page 78 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper is an empirical exploration of real interest rate movements in the United States over the last fifty years. It focuses on several questions which have repeatedly arisen in the literature. How valid is the hypothesis associated with Fama (1975) that the real rate of interest is constant? Does the real rate decline with increases in expected inflation? Are cyclical movements in real variables correlated with real rate movements? How reliable is the Fishei (1930) effect where nominal interest rates reflect changes in expected inflation? What kind of variation in real interest rates have we experienced in the last fifty years? Have real rates turned negative in the 1970s, as is commonly believed, and were they unusually high in the initial stages of the Great Depression? In pursuing these questions, this paper first outlines in section II the methodology and theory used in the empirical analysis. The empirical results then follow in section III, and a final section contains the concluding remarks.
Download or read book Inflation and Real Interest Rates on Assets with Different Risk Characteristics written by John P. Huizinga and published by . This book was released on 2010 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: Several recent studies find that ex ante real returns for short-term U.S. Treasury securities are negatively correlated both with inflation and with nominal interest rates. This paper examines whether these findings extend to the short-term holding return on publicly and privately issued securities of longer maturity, are robust with respect to the choice of price index, and are stable over time. Our results show that before 1979 a negative relationship of ex ante real returns with inflation and nominal interest rates does appear for the longer maturity assets. In fact, the relationship grows stronger with increases in maturity length. This suggests that although short-term U.S. Treasury bills were, of all the assets we study, the best hedge against expected inflation, none of the assets were a perfect hedge. We find a statistically significant change in the stochastic process of bond returns in 1979, with nominal interest rates and ex ante real holding returns being positively correlated in this latter period. This is not true for stocks, however. While the above results are robust to the choice of price index, we show that estimating the level of ex ante real returns depends crucially on the price index chosen.
Download or read book Is There a World Real Interest Rate written by Joseph E. Gagnon and published by . This book was released on 1993 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comparison, during Sept. 1977-Dec. 1992, of interest rates in the United States and 8 other OECD countries: Belgium, Canada, Denmark, Germany, Japan, the Netherlands, Switzerland and the United Kingdom. Cf. p. 2.
Download or read book Intertemporal Substitution Risk Aversion and Short Term Interest Rates written by Fernando Restoy and published by . This book was released on 1992 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the implications of a general representative agent intertemporal asset pricing model on the determination of the short term interest rates. The model includes an extension of the Non-expected Utility Isoelastic Preferences that incorporates non-separability between private consumption and government expenditure. The model yields a generalized Fisher equation where the nominal interest rates are explained by the expected depreciation of the purchasing power of money, an endogenously determined required risk free rate and an inflation risk premium. The econometric estimations suggest that the common rejection of the Fisher hypothesis can be, at least, partially explained by the traditional use of ad|hoc misspecified models. On the other hand, while the inflation risk premium is estimated to be small relative to the ex-ante real interest rate, its magnitude is substantially higher than the one obtained under the standard single-good expected utility models.
Download or read book Indexed Bonds and Monetary Policy written by Yukinobu Kitamura and published by . This book was released on 1996 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Nominal Interest Rates and Loan Volume with Heterogeneous Beliefs written by Richard Roll and published by . This book was released on 1997 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Decomposing U S Nominal Interest Rates into Expected Inflation and Ex Ante Real Interest Rates Using Structural VAR Methodology written by Pierre St-Amant and published by . This book was released on 1998 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, the author uses structural vector autoregression methodology to decompose U.S. nominal interest rates into an expected inflation component and an ex ante real interest rate component. He identifies inflation expectations and ex ante real interest rate shocks by assuming that nominal interest rates and inflation expectations move one-for-one in the long-run ? they are cointegrated (1,1) ? and that the real interest rate is stationary. He finds that changes in inflation expectations and in the ex ante real interest rate are both important in explaining fluctuations in the U.S. 1-year and 10-year government bond rates. The author also finds that, while the increase in the 1-year and the 10-year bond rates in the 1970s and the early 1980s mainly reflects higher inflation expectations, changes in ex ante real interest rates appear to account for most of the fluctuations in these rates in 1994 and in the first half of 1995.
Download or read book Are Real Interest Rates Equal Across Countries written by Frederic S. Mishkin and published by . This book was released on 1982 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: The proposition that real rates are equal across countries is worth studying because it is central to our understanding of open economy macroeconomics and because it is also an important issue to policy makers. If it is true, then domestic monetary authorities have no control over their real rate relative to the world rate, limiting the impact of their stabilization policies. In addition, as Feldstein has pointed out, unless real rates can differ across countries, policies directed at increasing domestic savings cannot increase the rate of capital formation and hence productivity. The equality of real rates is also worth investigating, because it is intimately linked to and provides information on the basic parity conditions featured so prominently in open economy macro models.This paper conducts empirical tests of the equality of real rates and other parity conditions across countries using euro rate data over the1967-II to 1979-II sample period. The empirical evidence strongly rejects the hypothesis of the equality of real euro rates across countries. The joint hypotheses of uncovered interest parity and ex ante relative PPP, or the unbiasedness of forward rate forecasts and ex ante relative PPP, are also strongly rejected. Yet independent tests of uncovered interest parity, the unbiasedness of forward rate forecasts and ex ante relative PPP yield few rejections and high marginal significance levels. The evidence suggests that it is worth studying open economy models which allow: 1) domestic real rates to differ from world rates, 2) time varying risk premiums in the forward market or 3) deviations from ex ante relative purchasing power parity.The evidence also leaves open the possibility for policy makers to exertsome control over their domestic real rate relative to those in the rest of the world. However, the evidence does not rule out that there is a tendency for real rates across countries to equalize over time, and this is an important topic for further research.
Download or read book The Term Structure of Real Rates and Expected Inflation written by Andrew Ang and published by . This book was released on 2007 with total page 82 pages. Available in PDF, EPUB and Kindle. Book excerpt: Changes in nominal interest rates must be due to either movements in real interest rates, expected inflation, or the inflation risk premium. We develop a term structure model with regime switches, time-varying prices of risk, and inflation to identify these components of the nominal yield curve. We find that the unconditional real rate curve in the U.S. is fairly flat around 1.3%. In one real rate regime, the real term structure is steeply downward sloping. An inflation risk premium that increases with maturity fully accounts for the generally upward sloping nominal term structure.
Download or read book International Parity Relationships and Tests for Risk Premia in Forward Foreign Exchange Rates written by Bruce G. Resnick and published by . This book was released on 1990 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Effect of Risk on Interest Rates written by Pentti J. K. Kouri and published by . This book was released on 1981 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the effects of real income and price level uncertainty on equilibrium interest rates. It is demonstrated that even if there are no outside nominal assets, the interest rate on nominal bonds contains a risk premium, or as the case may be, a risk discount. The sign, and the magnitude, of the deviation from the Fisher parity depends on the covariance between the purchasing power of money on the one hand and real income on the other. The second part of the paper extends the model into a model of two countries, two monies and two bonds denominated in these two monies. It is shown, in contrast with statements made in the literature, that the 'efficiency' of international financial markets does not imply equality of expected real interest rates on bonds denominated in different currencies, nor does it imply that the forward exchange rate should be an unbiased predictor of the future spot exchange rate. This is again true even when there are no outside nominal assets in the world economy.
