in previous studies, i.e., the finding of nominal interest rates not fully adjusting to changes in inflation, may be … attributed to the particular time series behavior of inflation and interest rates which cannot be accounted for by standard non …-stationary models. The stochastic process governing the bivariate system of inflation and interest rates depends on the level of the …

relationship between nominal interest rates and inflation rates taking into consideration the short run dynamics of interest rates … inflation for more than half of the countries under study …