The Fisher effect: a Kalman filter approach to detecting structural change
AbstractThis article uses quarterly data on short-run nominal interest rates and inflation rates over the last four or three decades collected from Australia, Japan, Malaysia and Singapore to test whether the Fisher relation has empirical support. Since meaningful Fisher effect tests critically depend on the integration and cointegration properties of the variables, we present some empirical evidence on these issues and we also apply the Kalman filter to estimate the time-varying parameters. The results show that the data are generally rejecting a full Fisher effect. This implies that nominal interest rates do not respond point-for-point to changes in the expected inflation rates. The possible reasons for the inability to detect a full Fisher effect are also discussed.
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Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Applied Economics Letters.
Volume (Year): 15 (2008)
Issue (Month): 8 ()
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Web page: http://www.tandf.co.uk/journals/routledge/13504851.html
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- Yuki Toyoshima & Shigeyuki Hamori, 2011. "Panel cointegration analysis of the Fisher effect: Evidence from the US, the UK, and Japan," Economics Bulletin, AccessEcon, vol. 31(3), pages 2674-2682.
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