The Real Interest Rate: An Empirical Investigation

68 Pages Posted: 16 Jul 2004 Last revised: 15 Sep 2010

See all articles by Frederic S. Mishkin

Frederic S. Mishkin

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: 1981


This paper is an empirical exploration of real interest rate movements in the United States over the last fifty years. It focuses on several questions which have repeatedly arisen in the literature. How valid is the hypothesis associated with Fama (1975) that the real rate of interest is constant? Does the real rate decline with increases in expected inflation? Are cyclical movements in real variables correlated with real rate movements? How reliable is the Fishei (1930) effect where nominal interest rates reflect changes in expected inflation? What kind of variation in real interest rates have we experienced in the last fifty years? Have real rates turned negative in the 1970s, as is commonly believed, and were they unusually high in the initial stages of the Great Depression? In pursuing these questions, this paper first outlines in section II the methodology and theory used in the empirical analysis. The empirical results then follow in section III, and a final section contains the concluding remarks.

Suggested Citation

Mishkin, Frederic S., The Real Interest Rate: An Empirical Investigation (1981). NBER Working Paper No. w0622, Available at SSRN:

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