Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/189244
Authors: 
Gregory, Allan W.
Watt, David G.
Year of Publication: 
1995
Series/Report no.: 
Queen's Economics Department Working Paper 923
Abstract: 
This paper analyses the effects of inflation on ex-post real interest rates in an international framework. A dynamic factor model is estimated in which real interest rates are influenced by real interest and inflation factors that are common to all the countries, and by country- specific factors. We find that the source of domestic inflation is an important determinant of the effect of inflation on real interest rates. A common inflation factor has a negative effect on ex-post real interest rates lending support to a form of the Mundell-Tobin effect in international real interest rates, and that a country-specific inflation factor tends to have a positive effect.
Subjects: 
real interest rates
world components
Kalman filter
scoring
JEL: 
E43
F40
Document Type: 
Working Paper
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