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Nominal Interest Rates as Indicators of Inflation Expectations
Author(s) -
Söderlind Paul
Publication year - 1998
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/1467-9442.00114
Subject(s) - economics , inflation (cosmology) , nominal interest rate , interest rate , real interest rate , fisher hypothesis , international fisher effect , econometrics , monetary policy , monetary economics , macroeconomics , physics , theoretical physics
The properties of nominal interest rates as indicators of inflation expectations are evaluated. Are they unbiased? How precise are they? To arrive at robust results, a range of different methods are applied on several US and UK data sets. The results show that the interest rate level is a reasonably good indicator of the level of inflation expectations. However, changes in interest rates are poor indicators of changes inflation expectations.