The accompanying diagram shows data for the interest rate on 10-year euro area government bonds and inflation
Question:
The accompanying diagram shows data for the interest rate on 10-year euro area government bonds and inflation rate for the euro area for 1996 through mid-2014, as reported by the European Central Bank. How would you describe the relationship between the two? How does the pattern compare to that of the United States in Figure 10-8?
Figure 10-8
Transcribed Image Text:
10-Year Treasury constant maturity rate, inflation rate 20% 15 10 5 0 -5 1953 (a) Changes in Expected Inflation and Interest Rates Inflation rate 1960 1970 1980 10-Year Treasury constant maturity rate 1990 2000 2010 2014 Year 10-Year Treasury constant maturity rate 6% 5 A 3 2 (b) Changes in Expected Rate of Return on Investment Spending and Interest Rates 2002 2004 Housing boom 2006 2008 Housing bust 2010 2012 2014 Year
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