Is it really the Fisher effect?
AbstractMany researchers have used a cointegration approach to test for the Fisher effect. This note argues that the cointegration of the nominal interest rate and the inflation rate is consistent with any theory implying a stationary ex post real interest rate and so is not a sufficient condition for the Fisher effect to hold. The sufficient condition is the unpredictability of the inflation forecast error implied by the nominal interest rate and this condition may be tested using the signal extraction framework of Durlauf and Hall (1988, 1989).
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics Letters.
Volume (Year): 13 (2006)
Issue (Month): 4 ()
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Other versions of this item:
- Johnson, Paul, 2004. "Is it Really the Fisher Effect?," Vassar College Department of Economics Working Paper Series 58, Vassar College Department of Economics.
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