Consumption, Inflation Risk, and Real Interest Rates: An Empirical Analysis
- 1 January 1994
- journal article
- research article
- Published by University of Chicago Press in The Journal of Business
- Vol. 67 (1) , 69-96
- https://doi.org/10.1086/296624
Abstract
The consumption-based asset pricing model is used to examine the relation between inflation and interest rates. To the extent that inflation is correlated with real consumption opportunities, expected real interest rates should incorporate a premium for inflation covariance risk. The empirical results suggest a statistically reliable premium for inflation covariability risk in short-term interest rates. Moreover, part of the time-series variation in inflation covariability risk is pre dictable.This publication has 4 references indexed in Scilit:
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