Real interest rates in the early 1980s

This paper examines the causes behind the high ex post real interest rates experienced in the United States during the early 1980s. This paper shows that expected long-term inflation rates were very high during the period, resulting in ex ante long-term real interest rates that were much lower than the ex post rates. Ex ante real rates in the high-deficit early 1980s were not much higher than those experienced during 2000, a year that had a large budget surplus.