Fundamentals of the us and the UK interest rates under the rational expectation scheme

• Autores: Ignacio Mauleón Torres, Mª Mar Sánchez
• Localización: Working papers = Documentos de trabajo: Serie AD, Nº. 20, 2000
• Idioma: inglés
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• Resumen

  • This paper presents a macro-econometric model for medium- and long-term nominal interest rates and the empirical results obtained with US and UK data. The explanatory equation for nominal interest rates is derived from the equilibrium condition of the savings market and takes real, financial and foreign aspects into account. Expected values of the inflation rate appear as regressors and, assuming rational expectations, two alternative models are obtained and estimated by the generalized method of moments. The empirical results for the US support: a) the strong influence of the inflation rate on the nominal interest rate (although the Fisher hypothesis is not completely fulfilled), b) the importance of the growth rate of the real GDP in the interest-rate determination, and c) the fulfilment of the Ricardian hypothesis. The UK nominal interest rate follows the US nominal interest rate.