Interest Rates, Uncertainty and the Livingston Data

Abstract

The observed relationship between the standard deviation of forecasts and past forecast errors as found in the Livingston survey suggests the interpretation of the standard deviation as a measure of inflation uncertainty. The mean and the standard deviation for the inflation rate forecast found in the Livingston survey, furthermore, are used as regressors in a reduced‐form interest rate equation. The results indicate a large negative effect of such uncertainty on interest rates. The inclusion of the uncertainty measure and commonly omitted lagged values of all variables in our analysis of data leads to more theoretically plausible estimated effects of money growth and expected inflation on interest rates than do standard estimates.

Split Bond Ratings and Information Opacity Premiums

“…Consequently, this paper will concentrate on split ratings as a measure of information opacity.While previous studies find evidence that split ratings are an indication of information opacity, no study has examined the impact of split ratings and the implied information opacity on bond yield. If split ratings are indeed a signal of information opacity, then split rated bonds are expected 1 For example, Bomberger and Frazer (1981) find that disagreement about future inflation (as measured by standard deviations of inflation forecasts) is positively correlated with inflation uncertainty (as measured by the mean forecast errors). 2 We use the term "information opacity" to incorporate information uncertainty or ambiguity.Financial Management • Summer 2010 • pages 515 -532 3 Several recent studies of corporate bonds identify information opacity as a determinant of Treasury spreads, the difference between the yields for corporate bonds and Treasury securities of similar maturity.…”

“…While previous studies find evidence that split ratings are an indication of information opacity, no study has examined the impact of split ratings and the implied information opacity on bond yield. If split ratings are indeed a signal of information opacity, then split rated bonds are expected 1 For example, Bomberger and Frazer (1981) find that disagreement about future inflation (as measured by standard deviations of inflation forecasts) is positively correlated with inflation uncertainty (as measured by the mean forecast errors). 2 We use the term "information opacity" to incorporate information uncertainty or ambiguity.…”

Inflation Instability Impact on Interest Rate in Egypt: Augmented Fisher Hypothesis Test

“…Chan, 1994;Tzavalis and Wickens, 1996;Kandel et al, 1996;and Berument, 1999). On the other hand, other literature reported a negative relationship between inflation uncertainty and nominal interest rate (Bomberger and Frazer, 1981;Zilberfarb, 1989), Sarte, 1998;Jorda and Salyer, 2003). Berument et al (2005) investigated this link between inflation variability and interest rates in the UK before and after the inflation targeting regime and supports the notion of inflation targeting regimes.…”

Türki̇ye’de Enflasyon Beli̇rsi̇zli̇ği̇ İle Fai̇z Orani Arasindaki̇ Nedenselli̇k İlişki̇si̇: Kayan Pencere Nedenselli̇k Testi̇

“…Consumers willing to protect their earnings against inflation increase their savings. In this case, inflation uncertainty affects savings negatively and interest rates positively (Juster and Watchel, 1972a;Juster and Watchel, 1972b;Juster and Taylor, 1975;Levi and Makin, 1979;Bomberger and Frazer, 1981;Hartman and Makin, 1982).…”