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Is the Fisher effect robust? Further evidence

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  • Ky-Hyang Yuhn
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    Abstract

    New international evidence exists on the Fisher effect in the United States, the United Kingdom, Japan, Germany and Canada over the modern (post-March 1973) floating exchange rate experience. Some puzzling data has been observed which suggests that the Fisher effect appears to be strong only for particular sample periods. It has also been reported in the literature that the Fisher effect is more likely in the long run, and that it is not common across economic regimes. This study sheds some light on these controversial issues taking advantage of more powerful tests for unit roots and cointegration. The findings for the Fisher effect contrast with previous results, especially those of Mishkin. The empirical results appear to accord with historical observations on interest rate movements in the five countries. Some important results are as follows: (1) the Fisher effect is not robust to policy changes; (2) there is strong evidence of a long-run Fisher effect for the United States, Germany, and Japan, but little evidence for the United Kingdom and Canada; (3) the short-run Fisher effect is only detected in Germany.

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    File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/758525514&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

    Volume (Year): 3 (1996)
    Issue (Month): 1 ()
    Pages: 41-44

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    Handle: RePEc:taf:apeclt:v:3:y:1996:i:1:p:41-44

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    Cited by:
    1. Awomuse, Bernard O. & Alimi, Santos R., 2012. "The Relationship between Nominal Interest Rates and Inflation: New Evidence and Implication for Nigeria," MPRA Paper 49684, University Library of Munich, Germany.
    2. Kose, Nezir & Emirmahmutoglu, Furkan & Aksoy, Sezgin, 2012. "The interest rate–inflation relationship under an inflation targeting regime: The case of Turkey," Journal of Asian Economics, Elsevier, vol. 23(4), pages 476-485.
    3. Maghyereh, A. & Al-Zoubi, H., 2006. "Does Fisher Effect Apply in Developing Countries: Evidence From a Nonlinear Cotrending Test applied to Argentina, Brazil, Malysia, Mexico, Korea and Turkey," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(2).
    4. H.a. Mitchell-innes & M.j. Aziakpono & A.p. Faure, 2007. "Inflation Targeting And The Fisher Effect In South Africa: An Empirical Investigation," South African Journal of Economics, Economic Society of South Africa, vol. 75(4), pages 693-707, December.
    5. Ramaprasad Bhar, 2010. "Stochastic Filtering With Applications In Finance:," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 7736.

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