Economic Quarterly

1995

 

Winter 1995

An Empirical Measure of the Real Rate of Interest

Robert M. Darin and Robert L. Hetzel

In the absence of a commonly accepted series of the real rate of interest, the typical behavior of this rate remains contentious. The authors derive alternative measures of the short-term real rate from various surveys of inflation expectations. These measures suggest that the real rate averages about 2 percent. Substantial deviations from this average, however, can occur over extended periods of time.



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