measured rates of inflation may have been biased estimates of the expected rates of inflation.
In France and Germany significantly lower rates of inflation were accompanied by nominal yields that exhibited no significant change in the third sub-sample.
Comparing the Percentage Changes in Nominal Interest Rates With Percentage Changes in Rates of Inflation
rates of interest after 1966 seemed to be fully explained by higher rates of inflation.
Only as they became convinced of sustained, lower rates of inflation, did they build these into lowered, expected rates of inflation and lower nominal rates of interest.
Are Interest Rates and Rates of Inflation Cointegrated?
The close inflation rate-interest rate connection observed up to the end of the second sub-sample loosened thereafter as market participants showed inertia in adapting their expectations to falling measured rates of inflation.
In seven countries, variations in average, nominal rates of interest, in general, reflected variations in average rates of inflation over four consecutive, sub-sample time periods beginning in 1957 and ending in 1996.
It has strived to balance desirable economic conditions such as full employment, economic growth, and low long-term interest rates with low rates of inflation.
The tax-related distortions and economic complexities associated even with stable, positive rates of inflation argue strongly for price stability.
Finally, persistently high rates of inflation in peacetime in the United States have frequently been associated with relatively low rates of real economic growth.