@article {Omay:2010:0003-6846:2941,
title = "The effects of inflation uncertainty on interest rates: a nonlinear approach",
journal = "Applied Economics",
parent_itemid = "infobike://routledg/raef",
publishercode ="routledg",
year = "2010",
volume = "42",
number = "23",
publication date ="2010-09-01T00:00:00",
pages = "2941-2955",
itemtype = "ARTICLE",
issn = "0003-6846",
eissn = "1466-4283",
url = "https://www.ingentaconnect.com/content/routledg/raef/2010/00000042/00000023/art00003",
doi = "doi:10.1080/00036840801964757",
author = "Omay, Tolga and Hasanov, Mubariz",
abstract = "In this article, we investigate the effects of inflation variability on short-term interest rates within a nonlinear smooth transition regression framework. The test results suggest that only the conditional mean of the inflation is a nonlinear process whereas the conditional variance is time variant but linear. Using the square root of conditional variance as a proxy for inflation risk, we estimate Fisher equation augmented with inflation risk. Although the estimated Fisher equations suggest that inflation risk reduces short-term interest rates, we find that the effects of inflation risk on interest rates are regime-dependent. Particularly, we find that the negative effects of inflation variability on nominal rates are greater in low-inflationary regimes when compared to high-inflationary regimes. On the other hand, it is found that both inflation and inflation uncertainty raise the expected inflation effect.",
}