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Determinants of the expected real long-term interest rates in the G7-countries

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  • Krämer, Jörg W.
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    Abstract

    The paper investigates which factors determine the expected real long-term interest rates of the G7-countries as a whole within a single equation error correction model. Inflationary expectations are generated using the low frequency component of inflation provided by the Hodrick-Prescott filter. A comparision of the calculated expected inflation rates with those resulting from index-linked and conventional UK bonds suggests this approach to be appropriate. Expected real long-term interest rates turn out to be influenced positively by real short-term interest rates, capacity utilization and structural public borrowing.

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    File URL: http://econstor.eu/bitstream/10419/46847/1/25772592X.pdf
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    Bibliographic Info

    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 751.

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    Date of creation: 1996
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    Handle: RePEc:kie:kieliw:751

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