Logo
Munich Personal RePEc Archive

Decomposing Euro Area Sovereign Debt Yields into Inflation Expectations and Expected Real Interest Rates

Mirdala, Rajmund (2015): Decomposing Euro Area Sovereign Debt Yields into Inflation Expectations and Expected Real Interest Rates. Published in: Journal of Advanced Research in Law and Economics , Vol. 7, No. 4 (December 2015): pp. 716-739.

Warning
There is a more recent version of this item available.
[thumbnail of MPRA_paper_68866.pdf]
Preview
PDF
MPRA_paper_68866.pdf

Download (525kB) | Preview

Abstract

Quantitative easing conducted by European central bank to fight persisting risks of deflation is drawing an attention of increasing number of empirical studies. Moreover, effectiveness of monetary policy at near zero inflation rates reveals lot of issues on whether interest rates really have a lower bound around zero percent. As a result, traditional views on the role of inflation expectations and expected real interest rates in the long-term interest rates determination face the challenge of fundamental revision. In the paper we analyze relative contributions of inflation expectations and expected real interest rates to long-term interest rates on government bonds leading path as well as their responses to both types of shocks in the Euro Area member countries using SVAR methodology. We also decompose long-term interest rates into transitory and permanent components. Our research revealed considerable differences in the role of inflation expectations and expected real interest rates shocks in determining long-term interest rates between core and periphery countries of the Euro Area. The crisis period even intensified this trend.

Available Versions of this Item

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.