Abstract
The current financial crisis has reduced government bond yields in Germany, the U.S., the UK and other countries. Low interest rates do create some problems for the European insurance industry. Especially life insurers seem to face some difficulties. The empirical results reported in this paper give support to the point of view that the relationship among German long-term interest rates, consumer price inflation and industrial production has changed significantly in the year 2009. Turning to the important question under which circumstances an increase to interest rates is likely to occur the empirical evidence reported in this paper does indicate that higher inflation rates should be a cause for rising bond yields.
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