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Exploring the real interest rate puzzle

Authors
Journal
The Quarterly Review of Economics and Finance
1062-9769
Publisher
Elsevier
Publication Date
Volume
34
Issue
4
Identifiers
DOI: 10.1016/1062-9769(94)90020-5
Disciplines
  • Economics

Abstract

Abstract This paper analyzes the puzzling behavior of real interest rates over the 1970–1990 period. Using data on expectations of future prices changes to estimate the expected real rate of interest, we find that the real rate was not so low as reported in the 1970s nor so high as reported in the 1980s. However, the expected real rate is still substantially lower in the 1970s than in the 1980s and the abrupt large structural change that occurred in 1979–1981 still exists.

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