Interest rates as predictors of inflation in small economies: Some empirical results
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Summary
It is the purpose of this paper to suggest that for small or medium size developed economies well integrated into the international financial system the short-term rate of interest is unlikely to be an efficient or even a particularly good predictor of inflation. It is argued that the rate of interest in these countries is much more likely to reflect foreign influences first and inflation expectation second and hence that the rate of interest may not efficiently embody all information relevant to the future inflation rate. This argument is seen to be supported by empirical evidence.
Keywords
Interest Rate Empirical Evidence Economic Theory Good Predictor Empirical Result
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© Physica-Verlag 1980