Hornstein, Andreas; Uhlig, Harald - Federal Reserve Bank of Richmond - 1999
What is the source of interest rate volatility? Why do low interest rates precede business cycle booms? Most observers … rather small fluctuations in real interest rates. Here, however, we present two models of the real business cycle variety in … facts. The second model also replicates the cyclical behavior of real interest rates. The models build on recent work by …