Premium
Real Rates, Expected Inflation, and Inflation Risk Premia
Author(s) -
Evans Martin D. D.
Publication year - 1998
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/0022-1082.75591
Subject(s) - economics , inflation (cosmology) , real interest rate , risk premium , econometrics , fisher hypothesis , term (time) , monetary economics , interest rate , quantum mechanics , physics , theoretical physics
This paper studies the term structure of real rates, expected inflation, and inflation risk premia. The analysis is based on new estimates of the real term structure derived from the prices of index‐linked and nominal debt in the U.K. I find strong evidence to reject both the Fisher Hypothesis and versions of the Expectations Hypothesis for real rates. The estimates also imply the presence of time‐varying inflation risk premia throughout the term structure.