IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/1647.html
   My bibliography  Save this paper

Real Interest Rates, Nominal Shocks, and Real Shocks

Author

Listed:
  • Driffill, John

Abstract

This paper uses a structural time-series analysis to analyse the properties of ex-ante real interest rates of the five major OECD economies in relation to temporary and permanent shocks to real output. Following Blanchard and Quah (1989) we refer to these innovations as ‘nominal’ and ‘real’ shocks respectively. The relationships of rates to these shocks appear to be qualitatively consistent with predictions of stochastic general equilibrium models of business cycles driven by both real and nominal disturbances. Real and nominal shocks originating in the United States are found to be the most important causes of persistence in ex-ante real interest rates, but of the two, only nominal shocks cause dynamic movements in rates that are coherent across all countries. Further results indicate that the rise in real interest rates experienced by these countries in the early 1980s was mainly due to nominal shocks in all five countries; real shocks played little or no role.

Suggested Citation

  • Driffill, John, 1997. "Real Interest Rates, Nominal Shocks, and Real Shocks," CEPR Discussion Papers 1647, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1647
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1647
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Real and Nominal Shocks; Real Interest Rates; Structural VARs;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:1647. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.