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Is the Real Interest Rate Stable?

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  • Rose, Andrew Kenan

Abstract

Univariate time series models for consumption, nominal interest rat es, and prices each appear to have a single unit-root before 1979. If nominal interest rates have a unit-root , but inflation and forecast errors do not, then ex ante real interest rates have a unit-root and are therefore nonstationary. The unit-root characteristic of real interest rates is puzzling: man y models imply that the growth rate of consumption and the real interest rate should have similar time-series characteristics; also, nominal returns for other assets appear to have very different time-series properties. Copyright 1988 by American Finance Association.

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Bibliographic Info

Article provided by American Finance Association in its journal Journal of Finance.

Volume (Year): 43 (1988)
Issue (Month): 5 (December)
Pages: 1095-1112

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Handle: RePEc:bla:jfinan:v:43:y:1988:i:5:p:1095-1112

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