Related papers: Interest Rates and Inflation
A relation between interest rates and inflation is presented using a two component economic model and a simple general principle. Preliminary results indicate a remarkable similarity to classical economic theories, in particular that of…
We develop a model to price inflation and interest rates derivatives using continuous-time dynamics that have some links with macroeconomic monetary DSGE models equipped with a Taylor rule: in particular, the reaction function of the…
Keen's model describes the dynamics between wage share, employment rate and debt ratio. In literature, the model was extended to represent the effects of inflation and also the speculative money flow. Based on the inflationary model, we…
This paper addresses the structure and dynamics of an open market economy and its relations with the real interest rate. In this respect, the paper is situated within a broad conventional literature. However, it departs from the standard…
We test for the long-run relationship between stock prices, inflation and its uncertainty for different U.S. sector stock indexes, over the period 2002M7 to 2015M10. For this purpose we use a cointegration analysis with one structural break…
The notion that an independent central bank reduces a country's inflation is a controversial hypothesis. To date, it has not been possible to satisfactorily answer this question because the complex macroeconomic structure that gives rise to…
In economic studies and popular media, interest rates are routinely cited as a major factor behind commodity price fluctuations. At the same time, the transmission channels are far from transparent, leading to long-running debates on the…
This short note aims to introduce a rule which admits to compute %any time rate of interest in any time per any time, rate of inflation per any time in any moment, if the rate of interest or the rate of inflation by unity of time is an…
We develop a medium-size semi-structural time series model of inflation dynamics that is consistent with the view - often expressed by central banks - that three components are important: a trend anchored by long-run expectations, a…
The money supply is endogenous if the monetary policy strategy is the so called Inflation and Interest Rate Targeting, IRT. With that and perfect credibility, the theory of the price level and inflation only needs the Fisher equation, but…
This paper assesses the link between central bank's policy rate, inflation rate and output gap through Taylor rule equation in both United States and United Kingdom from 1990 to 2020. Also, it analyses the relationship between monetary…
We propose a new model for the joint evolution of the European inflation rate, the European Central Bank official interest rate and the short-term interest rate, in a stochastic, continuous time setting. We derive the valuation equation for…
In this paper, we present own point of view how the unexpected fluctuations of the long-term real interest rate can be explained. We describe a macroeconomic environment by the modification of the fundamental macroeconomic equilibrium model…
In this survey paper we discuss recent advances on short interest rate models which can be formulated in terms of a stochastic differential equation for the instantaneous interest rate (also called short rate) or a system of such equations…
Interest rate market models, like the LIBOR market model, have the advantage that the basic model quantities are directly observable in financial markets. Inflation market models extend this approach to inflation markets, where zero-coupon…
We formulate a forward inflation index model with multi-factor volatility structure featuring a parametric form that allows calibration to correlations between indices of different tenors observed in the market. Assuming the nominal…
We propose a class of discrete-time stochastic models for the pricing of inflation-linked assets. The paper begins with an axiomatic scheme for asset pricing and interest rate theory in a discrete-time setting. The first axiom introduces a…
Inflation exhibits state-dependent, skewed, and fat-tailed dynamics that make risk a central concern for monetary policy. Accordingly, inflation risks are distributional and cannot be fully captured by mean-based models. We propose a…
In this paper we show that the dynamics associated with slow-roll models of inflation can be investigated through a method called deformation procedure. Using the latter, we explicitly derive an expression linking two slow-roll inflationary…
We propose a model for the joint evolution of European inflation, the European Central Bank official interest rate and the short-term interest rate, in a stochastic, continuous time setting. We derive the valuation equation for a contingent…