Research Seminar - Max Gillman (University of Missouri, St. Louis) - Explaining Real US Interest Rates with a User-Cost Wedge

Research Seminar - Max Gillman (University of Missouri, St. Louis) - Explaining Real US Interest Rates with a User-Cost Wedge

Co-author: Tamas Z. Csabafi (University of Missouri, St. Louis)

Abstract:
The paper explains historical quarterly real 3-month US Treasury bill interest rates in the United States economy from 1975Q1-2020Q4. It extends the standard asset pricing model through fundamentals plus a user-cost wedge. The wedge arises from the consumer optimally avoiding the inflation tax through bank supplied exchange credit. Besides explaining business cycle filtered real ex-post interest rates, it also predicts major variables including labor. Adding back in the HP filtered trend that contains significant real interest rate regime changes, it explains closely the actual level of real interest rates, with a relative volatility near one.

Online Research seminars organized by the Bank of Finland's Research Unit are open to all researchers interested in the subjects covered. Those wishing to attend a seminar are kindly asked to register in advance, by filling in the Online Registration Form

The registration for each seminar is open until 9:00 am the day of the seminar. You will receive a link to join the seminar by email at the latest one hour before the seminar is scheduled to begin.