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A note on alternative measures of real bond rates

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  • Palle S. Andersen

Abstract

The purpose of this note is to derive measures of ex ante long-term real interest rates that satisfy Fisher's notion of a long-run relationship between expectations of inflation and nominal interest rates. We do so by adopting a backward-looking approach that also takes account of the increasing integration of financial markets by allowing for global influences on national bond rates. The results point to long memories in the inflation formation process as well as to significant international linkages. Moreover, once these effects are allowed for, expectations of inflation and long-term bond rates appear to be cointegrated with cointegration vectors of unity. However, whether the measures derived provide better estimates of agents' actual perceptions of ex ante real rates than those commonly used remains to be seen, as we do not test their forecasting ability.

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  • Palle S. Andersen, 1999. "A note on alternative measures of real bond rates," BIS Working Papers 80, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:80
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    References listed on IDEAS

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    1. Mr. M. F. Bleaney, 1997. "Can Switching Between Inflationary Regimes Explain Fluctuations in Real Interest Rates?," IMF Working Papers 1997/131, International Monetary Fund.
    2. Mishkin, Frederic S., 1992. "Is the Fisher effect for real? : A reexamination of the relationship between inflation and interest rates," Journal of Monetary Economics, Elsevier, vol. 30(2), pages 195-215, November.
    3. Gagnon, Joseph E & Unferth, Mark D, 1995. "Is there a world real interest rate?," Journal of International Money and Finance, Elsevier, vol. 14(6), pages 845-855, December.
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    Cited by:

    1. Jumah, Adusei & Kunst, Robert M., 2002. "On Mean Reversion in Real Interest Rates: An Application of Threshold Cointegtation," Economics Series 109, Institute for Advanced Studies.
    2. Nikolaj Malchow-Moeller & Bo Jellesmark Thorsen, "undated". "A Dynamic Agricultural Household Model with Uncertain Income and Irreversible and Indivisible Investments under Credit Constraints," Economics Working Papers 2000-7, Department of Economics and Business Economics, Aarhus University.
    3. Mojmir Hampl & Roman Matousek, 2000. "Credit Contraction in the Czech Republic: Causes and Effects," Archive of Monetary Policy Division Working Papers 2000/19, Czech National Bank.

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