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Fundamentals Of The Us And The Uk Interest Rates Under The Rational Expectation Scheme

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Author Info
Ignacio Mauleón (Universidad Rey Juan Carlos)
Mª Mar Sánchez (Universidad de Alicante)
Abstract

This paper presents a macro-econometric model for medium- and long-term nominal interest rates and the empirical results obtained with US and UK data. The explanatory equation for nominal interest rates is derived from the equilibrium condition of the savings market and takes real, financial and foreign aspects into account. Expected values of the inflation rate appear as regressors and, assuming rational expectations, two alternative models are obtained and estimated by the generalized method of moments. The empirical results for the US support: a) the strong influence of the inflation rate on the nominal interest rate (although the Fisher hypothesis is not completely fulfilled), b) the importance of the growth rate of the real GDP in the interest-rate determination, and c) the fulfilment of the Ricardian hypothesis. The UK nominal interest rate follows the US nominal interest rate.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2000-20.pdf
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Publisher Info
Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2000-20.

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Length: 24 pages
Date of creation: Oct 2000
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Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2000-20

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Related research
Keywords: rational expectations; gmm estimation;

Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Knot, Klaas, 1995. "On the Determination of Real Interest Rates in Europe," Empirical Economics, Springer, vol. 20(3), pages 479-500.
  2. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March. [Downloadable!] (restricted)
  3. Jyh-Lin Wu & Show-Lin Chen, 1998. "A Re-examination of Real Interest Rate Parity," Canadian Journal of Economics, Canadian Economics Association, vol. 31(4), pages 837-851, November. [Downloadable!] (restricted)
  4. Pantula, Sastry G & Gonzalez-Farias, Graciela & Fuller, Wayne A, 1994. "A Comparison of Unit-Root Test Criteria," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(4), pages 449-59, October.
  5. Ghysels, Eric, 1990. "Unit-Root Tests and the Statistical Pitfalls of Seasonal Adjustment: The Case of U.S. Postwar Real Gross National Product," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 145-52, April.
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mª Mar Sánchez, 2002. "Interest-Rate Models For Us And Uk With Mixed Inflationary Expectations. A Comparison With The Rational And The Adaptive Scheme," Working Papers. Serie AD 2002-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
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