Economics, Econometrics and Finance
4 years ago

Investors' Behavior Drives Nominal Interest Rates in Response to Inflation Spike

Price Inflation, Portfolio Choice, and Nominal Interest Rates
Benjamin M. Friedman

Paper Summary

Related papers

Business, Management and Accounting
4 years ago

Low interest rates lead to higher private savings in developing countries.

Retirement Planning
Infrastructure Impact
Health Care Expenditure
1 view
Economics, Econometrics and Finance
4 years ago

Credit crunches could bring deflation, forcing central banks to lower rates.

Monetary Models
Macroeconomic Analysis
Macroeconomic Trends
2 views
Economics, Econometrics and Finance
4 years ago

Interest Rate Patterns Reveal Surprising Insights into Future Inflation Trends

Macroeconomic Analysis
Monetary Models
Option Pricing

The study looked at how investors change their bond investments in response to expected inflation. The researchers found that when investors expect prices to rise, they tend to reduce their bond holdings. This behavior leads to an increase in bond yields, which are interest rates on bonds. The study suggests that investors' portfolio choices play a significant role in the relationship between expected inflation and nominal interest rates.