The real exchange rate - real interest rate (RERI) relationship is central to most open economy macroeconomic models. However, empirical support for the relationship, especially when cointegrationbased methods are used, is rather weak. In this paper we reinvestigate the RERI relationship using...

Whereas previous studies have focused on the causal relation between nominal interest rates, this paper examines causal relationships between real rates for the United States and six other countries. Based on evidence from our full sample, we find that U.S. and foreign interest rates are not...

The real exchange rate - real interest rate (RERI) relationship is central to most open economy macroeconomic models. However, empirical support for the relationship, especially when cointegration-based methods are used, is rather weak. In this paper we reinvestigate the RERI relationship using...

We undertake a variance decomposition of index-linked bond returns for the US, UK and Iceland. In all cases, news about future excess returns is the key driver though only for Icelandic bonds are returns independent of inflation.

The current environment is characterized by low real rates and by policy rates close to or at their effective lower bound in all major financial areas. We analyze these unusual economic conditions from a secular perspective using data on aggregate consumption, wealth and asset returns. Our...

Any monetary policy maker using a short-term nominal interest rate as the primary policy tool will have an interest in understanding developments in ex-ante real interest rates. In this paper, several methods for calculating real interest rates for the United Kingdom are explored. These include:...

In many economies, the monetary policy instrument is the level of short-term nominal interest rates, but the monetary policy stance might be better characterised by the ex-ante real interest rate that this nominal rate implies, relative to some 'neutral' or 'natural' real rate of interest. In...

We investigate the volatility of real interest rates in 10 countries. An equilibrium model with financial frictions mimics the volatility of real rates and predicts a negative correlation of the conditional variance with the business cycle. Our contribution investigates the level and conditional...

This paper evaluates the properties of nominal interest rates as indicators of inflation expectations. Are they unbiased? How precise are they? To arrive at robust results, a range of different methods are applied on several S and UK data sets. The results show that the interest rate level is a...