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Five Weeks in the Life of the Pound: Interest Rates

By Donald Robertson and James Symons

Abstract

Yields to maturity of a set of nominal and index linked gilts are used to obtain estimates of the term structures of nominal and real interest rates. These allow calculation of the term structures of nominal and real interest rates. These also allow calculation of expected inflation. The estimation is performed for a period of five weeks including the date of sterling's exit from the ERM. We look at the macroeconomic consequences of the shift in the exchange rate regime as implied by the behaviour of financial markets, and how those markets incorporate new information.

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Citations

  1. (1992). Reading the message from the UK indexed bond market: real interest rates, expected inflation and the risk premium" mimeo
  2. (1992). Real Interest Rates and Index Linked Gilts" Centre for Economic Performance, LSE, Working Paper No.
  3. (1992). Term Structure Forecasts of Inflation",
  4. (1985). The Real Rate of Interest: inferences from the new U.K. indexed gilts",
  5. (1990). The Real Thing: A Dynamic Profile of the Term Structure of Real Interest Rates and Inflation Expectations in the United Kingdom, 1982-89",
  6. (1988). The Term Structure of Real Interest Rates"

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