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Autor:innen: 
Erscheinungsjahr: 
2006
Schriftenreihe/Nr.: 
Reihe Ökonomie / Economics Series No. 193
Verlag: 
Institute for Advanced Studies (IHS), Vienna
Zusammenfassung: 
This paper models the time-varying mean of the UK real and nominal short-term interest rate. Both rates mean revert to a time-varying central tendency in continuous-time interest rate models. Before and during British membership in the ERM, the mean of the real and nominal short rate have a strong negative correlation. Afterwards, when the UK implemented an inflation targeting policy, the mean of the real and nominal short rate are no longer negatively correlated, but instead have a strong positive correlation. The paper also reports empirical evidence of a relationship between the mean of the real and nominal short rate and inflation in the period before the departure from the ERM.
Schlagwörter: 
ERM
inflation targeting
nominal and real rates
term structure model
UK
JEL: 
E52
F33
G12
Dokumentart: 
Working Paper

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