An Empirical Examination of the Fisher Effect in Australia
AbstractThis paper analyzes the Fisher effect in Australia. Initial testing indicates that both interest rates and inflation contain unit roots. Furthermore, there are indications that the variables have non-standard error processes. To overcome problems associated with this and derive the correct small sample distributions of test statistics we make use of Monte Carlo simulations. These tests indicate that while a long-run Fisher effect seems to exist, there is no evidence of a short-run Fisher effect. This suggests that, while short-run changes in interest rates reflect changes in monetary policy, longer run levels indicate inflationary expectations. Thus, the longer run level of interest rates should not be used to characterize the stance of monetary policy. Copyright 1995 by The Economic Society of Australia.
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Bibliographic InfoArticle provided by The Economic Society of Australia in its journal The Economic Record.
Volume (Year): 71 (1995)
Issue (Month): 214 (September)
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Other versions of this item:
- Frederic S. Mishkin & John Simon, 1997. "An Empirical Examination of the Fisher Effect in Australia," NBER Working Papers 5080, National Bureau of Economic Research, Inc.
- Frederic S. Mishkin & John Simon, 1994. "An Empirical Examination of the Fisher Effect in Australia," RBA Research Discussion Papers rdp9410, Reserve Bank of Australia.
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
- G0 - Financial Economics - - General
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