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Inflation and the Holding Period Returns on Bonds

Published online by Cambridge University Press:  06 April 2009

Jeffrey F. Jaffe  and
Gershon Mandelker
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Extract

The relationship between the rate of inflation and the interest rate has been a topic of research for quite some time. A breakthrough in the analysis occurred years ago with Irving Fisher's hypothesis that the nominal interest rate fully reflects the available information concerning the possible future values of the rate of inflation. Others have extended Fisher's original insight to explain further the interaction between the rate of interest and inflation. For example, Mundell [26] uses the Pigou real-balance effect to hypothesize that the real rate of interest is inversely related to the rate of inflation.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 14 , Issue 5 , December 1979 , pp. 959 - 979
Copyright
Copyright © School of Business Administration, University of Washington 1979

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References

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