Sources Of Variation In International Real Interest Rates

Allan Gregory and David G. Watt

No 923, Working Paper from Economics Department, Queen's University

Abstract: This paper analyses the effects of inflation on ex-post real interest rates in an international framework. A dynamic factor model is estimated in which real interest rates are influenced by real interest and inflation factors that are common to all the countries, and by country- specific factors. We find that the source of domestic inflation is an important determinant of the effect of inflation on real interest rates. A common inflation factor has a negative effect on ex-post real interest rates lending support to a form of the Mundell-Tobin effect in international real interest rates, and that a country-specific inflation factor tends to have a positive effect.

Keywords: scoring; real interest rates; world components; Kalman filter (search for similar items in EconPapers)
JEL-codes: E43 F40 (search for similar items in EconPapers)
Pages: 35 pages
Date: 1995-03
References: Add references at CitEc
Citations: View citations in EconPapers (7)

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Journal Article: Sources of Variation in International Real Interest Rates (1995)
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:923

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