Inflation And The Mean-Reverting Level Of The Short Rate
In this paper we investigate whether inflation causes the time-varying mean-reverting level in the Balduzzi et al. (Review of Economics and Statistics, Vol. 80, No. 1 (1998), pp. 62-72) short rate model. We find a time-varying mean-reverting level for the UK nominal short rate, but the real short rate mean reverts to a constant. This suggests a monetary source for the time-varying mean-reverting level in nominal short rate models. The time-varying mean factor is closely related to market expectations about future inflation. This suggests that expected future inflation determines the mean-reverting level of the nominal short rate. Copyright © 2009 The Author. Journal compilation © 2009 Blackwell Publishing Ltd and The University of Manchester.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 78 (2010)
Issue (Month): 1 (01)
|Contact details of provider:|| Postal: Manchester M13 9PL|
Phone: (0)161 275 4868
Fax: (0)161 275 4812
Web page: http://www.blackwellpublishing.com/journal.asp?ref=1463-6786
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=1463-6786|
When requesting a correction, please mention this item's handle: RePEc:bla:manchs:v:78:y:2010:i:1:p:76-91. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.