Expectations, uncertainty and risk premium

In: Journal of financial economic policy, Band 9, Heft 3, S. 338-352

Abstract

Purpose
This study aims to examine short- and long-run effects of specific macroeconomic conditions on risk premium estimates on lending.


Design/methodology/approach
Empirical estimates are based on error correction and autoregressive distributed lag models.


Findings
The results suggest that, in the short run, inflation expectations, recession expectations and actual inflationary conditions tend to have a significant impact on risk premium estimates; in the long run, however, only inflation expectations and recession expectations are significant in risk premium estimates on lending.


Originality/value
This study examines how specific conditions of uncertainty and expectations influence variability in risk premium estimates on lending in the US economy.