The Sources of the Movements in Interest Rates: An Empirical Investigation

A. Penati

Rodney L. White Center for Financial Research Working Papers from Wharton School Rodney L. White Center for Financial Research

Abstract: The paper investigates the sources of interest rate movements in Italy during the 1970s. In that decade, the country experienced the highest and most variable inflation rate among the industrial nations and was affected both by external shocks and by shocks to the labor and financial markets. The paper shows that movements in inflationary expectations dominated the nominal interest rate variability. The part of variability that was not explained by expected inflation was accounted for by unanticipated changes in the terms of trade; by contrast, domestic monetary and real disturbances did not have a sizeable impact on the variability.

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Persistent link: https://EconPapers.repec.org/RePEc:fth:pennfi:02-86

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