Real interest rate persistence: evidence and implications

The real interest rate plays a central role in many important financial and macroeconomic models, including the consumption-based asset pricing model, neoclassical growth model, and models of the monetary transmission mechanism. We selectively survey the empirical literature that examines the time-series properties of real interest rates. A key stylized fact is that postwar real interest rates exhibit substantial persistence, shown by extended periods of time where the real interest rate is substantially above or below the sample mean. The finding of persistence in real interest rates is pervasive, appearing in a variety of guises in the literature. We discuss the implications of persistence for theoretical models, illustrate existing findings with updated data, and highlight areas for future research.Interest rates

Real interest rate persistence: evidence and implications

The real interest rate plays a central role in many important financial and macroeconomic models, including the consumption-based asset pricing model, neoclassical growth model, and models of the monetary transmission mechanism. The authors selectively survey the empirical literature that examines the time-series properties of real interest rates. A key stylized fact is that postwar real interest rates exhibit substantial persistence, shown by extended periods when the real interest rate is substantially above or below the sample mean. The finding of persistence in real interest rates is pervasive, appearing in a variety of guises in the literature. The authors discuss the implications of persistence for theoretical models, illustrate existing findings with updated data, and highlight areas for future research.Interest rates

Common fluctuations in OECD budget balances

We analyze comovements in four measures of budget surpluses for 18 OECD countries for 1980-2008 with a dynamic latent factor model. The world factor in national budget surpluses declines substantially in the 1980s, rises throughout much of the 1990s to a peak in 2000, before declining again in the most recent period. This world factor explains a substantial portion of the variability in budget surpluses across countries. World factors in national output gaps, dividend-price ratios, and military spending significantly explain variation in the world budget surplus factor. The significant relationship between national output gaps and OECD measures of cyclically adjusted budget surpluses suggests that such cyclical measures inadequately adjust for the international business cycle. Sizable fluctuations in idiosyncratic components of national budget surpluses often readily relate to well known "unusual" country circumstances.Budget ; Organisation for Economic Co-operation and Development

Is inflation an international phenomenon?

Common shocks, similarities in central bank reaction functions, and international trade potentially produce common components in international inflation rates. This paper characterizes such links in international inflation rates with a dynamic latent factor model that decomposes inflation for 65 countries into world, regional, and idiosyncratic components. The world component accounts for 34% of inflation variability on average across countries, although the importance of this global factor differs substantially across countries. Variables that reflect policy as well as economic and financial development strongly explain the cross-section variation in the relative importance of global influences. A parsimonious model of time variation in the factor loadings shows that most countries became more sensitive to international inflation influences over 1951 2006. In addition, European-specific influences became more important over time for countries participating in European economic and monetary integration.Inflation (Finance)

Determinants of the Organic Farmers' Demand for Hired Farm Labor

Labor and Human Capital,

Limits Of Loyalty: A Rediscovered Diary Reveals Atlanta\u27s Underground Unionists

Ever since the historical discovery of internal opposition to the Confederacy as described in Frank L. Owsley\u27s 1925 book, State Rights in the Confederacy, the subject has fascinated scholars of Southern history even while proving curiously unmanageable. For all his genius in puncturing the L...

Forecasting the equity risk premium: The role of technical indicators

Ministry of Education, Singapore under its Academic Research Funding Tier