EXPECTED INFLATION AND INTEREST RATES |
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Authors: | JOHN A. CARLSON |
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Abstract: | While there may have been a Darby-Feldstein effect in the 1960's (interest rates rising by more than expected inflation because of tax considerations), the relationship is so variable that it more likely reflects changing investor confidence in the expected returns to capital assets. In addition, the degree of capacity utilization appears to have a strong influence on short-term interest rates, and there is a statistically significant but quantitatively small liquidity effect from changes in the growth rate of money. |
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