This paper develops two models, one involving risk neutrality and the other risk aversion, which suggest that inflation … evidence supports the hypothesis that inflation uncertainty affects interest rates. Interpreted in terms of the risk neutral … positive impact on the expected real rate. If the results are interpreted in terms of the risk averse model, inflation …

’ prediction coefficient but makes that of the uninformed investors diminish. Inflation does not affect rational investors’ risk …The paper uses a Walrasian two-period financial market model with informed and uninformed constant absolute risk averse … (CARA) rational investors and noise traders. The investors allocate their initial wealth between risky assets and risk …

This paper develops two models, one involving risk neutrality and the other risk aversion, which suggest that inflation … evidence supports the hypothesis that inflation uncertainty affects interest rates. Interpreted in terms of the risk neutral … positive impact on the expected real rate. If the results are interpreted in terms of the risk averse model, inflation …