The long-term bond rate is cointegrated with the actual one-period inflation rate during two sample periods, 1961Q1 to 1979Q3 and 1961Q1 to 1995Q4. This result indicates that in the long run the bond rate and actual inflation move together. The nature of short-run dynamic adjustments between...

In the sample periods studied here, the bond rate and actual inflation move together. However, ways in which they have adjusted to each other in the short run have changed since 1979. In the pre-1979 period, when the bond rate rose above the current inflation rate, actual future inflation...

This article constructs an empirical measure of uncertainty about short-term inflation forecasts and finds the long bond rate to be positively correlated with this empirical measure over 1984Q1 to 2004Q3. The positive correlation suggests that an increase in uncertainty about short-term...

An equation explaining the long-run behavior of the bond rate from 1971 to 1993 indicates that inflation is the main long-run economic determinant of the bond rate. Monetary policy actions have short-run but no long-run effects on the rate. During the subperiod 1979 to 1993, however, some...