Can Switching Between Inflationary Regimes Explain Fluctuations in Real Interest Rates?

Michael Bleaney

No 1997/131, IMF Working Papers from International Monetary Fund

Abstract: It has recently been suggested that allowing for switches between different inflationary regimes produces a much better fit for the Fisher relationship between interest rates and inflation, at least for U.S. data. The paper assesses the merits of the regime-switching theory as an explanation for the apparent fluctuations in real interest rates in Australia, Canada, Germany, the United Kingdom, and the United States.

Keywords: WP; real interest rate; interest rate; inflation rate; nominal interest rate; Inflation; interest rates; yield gap; running mean inflation; dependent variable; high-inflation regime; interest rate data; long-term interest rates; debt ratio; LR statistic; test statistics; white-noise process; Real interest rates; Long term interest rates; Short term interest rates; Yield curve (search for similar items in EconPapers)
Pages: 25
Date: 1997-10-01
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Citations: View citations in EconPapers (3)

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