We consider the time series behavior of the U.S. real interest rate fr
om 1961 to 1986, using the methodology of Hamilton (1989), by allowing
three possible regimes affecting both the mean and variance. The resu
lts suggest that the ex-post real interest rate is essentially random
with means and variances that are different for the periods 1961-1973,
1973-1980 and 1980-1986. The inflation rate series also shows interes
ting shifts in both mean and variance. Series for the ex-ante real int
erest rate and expected inflation are constructed. Finally, we make cl
ear how our results can explain some recent findings in the literature
.