This paper estimates expected future real interest rates and inflation rates from observed prices of UK government nominal and index-linked bonds. The estimation method takes account of imperfections in the indexation of UK index-linked bonds. It assumes that expected log returns on all bonds...

One of the important determinants of the response of saving and consumption to the real interest rate is the elasticity of intertemporal substitution. That elasticity can be measured by the response of the rate of change of consumption to changes in the expected real interest rate. A detailed...

Workhorse Gaussian affine term structure models (ATSMs) attribute time-varying bond risk premia entirely to changing prices of risk, while structural models with recursive preferences credit it completely to stochastic volatility. We reconcile these competing channels by introducing a novel form...

This paper attempts to demonstrate a need to expand the simple Fisherian view whereby changes in interest rates are explained largely by changes in expected inflation. It presents and tests a model of expected, after-tax real interest rate behavior which, together with a group of explanatory...

Many past studies of relative financing costs in the United States and Japan have relied on interest rates from the 1970s and earlier when Japanese financial markets were subject to numerous regulations and controls and were shielded by capital controls from financial markets abroad. Interest...

Different approaches to quantifying the degree of capital mobility for a cross-section of currencies -- particularly saving-investment correlations and tests of real interest parity - have appeared to show a surprisingly low degree of financial market integration. We use a new data set, forward...

The central goverment now issues both nominal and iflation indexed long-term bonds in the United Kingdom. The difference in their yields provides one measure of the long-term expevted rate of inflation. The evidence suggests that higher long-term, expected , real yields are associated with...

Casual observation indicates that in recent years real interest rates in the United States appear to have risen sharply and have remained high relative to historical standards. Many observers have claimed that these high real rates have been transmitted abroad and have lead to high real rates in...

This paper examines the interaction between consumer durable goods andconsumer non-durable goods in determining the responsiveness of totalexpenditure to the after-tax real interest rate. The introduction ofconsumer durables into the consumer's decision problem can have importanteffects on the...

This paper examines the dynamic impact of government purchases in a simple general equilibrium model with both durable and non-durable consumer goods as well as productive capital. The model generates perhaps surprising results. In particular, increases in government purchases are shown to cause...