The impact of inflation uncertainty on interest rates in the UK
Author(s)
Date
1999Source Title
Scottish Journal of Political Economy
Print ISSN
0036-9292
Electronic ISSN
1467-9485
Publisher
Wiley-Blackwell Publishing Ltd.
Volume
46
Issue
2
Pages
207 - 218
Language
English
Type
ArticleItem Usage Stats
171
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Abstract
This paper assesses the effect of expected inflation and inflation risk on interest rates within the Fisher hypothesis framework. Autoregressive Conditional Heteroscedastic models are used to estimate the conditional variability of inflation as a proxy for risk. With the UK quarterly data from 1958:4 to 1994:4, we found that both the expected inflation and the conditional variability of inflation positively affect the UK three-month Treasury-bill rate.