Have real interest rates really fallen that much in Spain?

Roberto Blanco and Fernando Restoy ()
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Fernando Restoy: Banco de España

No 704, Working Papers from Banco de España

Abstract: This paper analyses the behaviour of real interest rates in the Spanish economy over the last 15 years. Since inflation-indexed-bonds are not available, changes in implicit real interest rates are estimated using several approaches suggested by macroeconomic and financial theory. In particular, we employ equilibrium conditions of a representative agent under several specifications of preferences. Moreover, we exploit no-arbitrage conditions in securities markets. The evidence we report indicates that inflation uncertainty could account for a notable part of the observed decrease in nominal rates. Consequently, the actual real cost of financing might have decreased significantly less than what the course of ex-post real rates would suggest.

Keywords: real interest rates; intertemporal marginal rate of substitution (search for similar items in EconPapers)
JEL-codes: E43 G12 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2007-02
New Economics Papers: this item is included in nep-cba, nep-cfn, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... o/07/Fic/dt0704e.pdf First version, February 2007 (application/pdf)

Related works:
Journal Article: HAVE REAL INTEREST RATES REALLY FALLEN THAT MUCH IN SPAIN? (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:0704

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