What Fisher Knew About His Relation, We Sometimes Forget
AbstractExpected consumption growth increases the real interest rate as one tries to smooth consumption over time. We demonstrate that placing it in the Fisher relation 1) is consistent with the Euler equation governing the purchase of nominal bonds, 2) explains observed procyclicality of the real interest rate, 3) is supported empirically, and 4) provides an alternative method for estimating the consumer's degree of relative risk aversion.
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Bibliographic InfoPaper provided by Bilkent University, Department of Economics in its series Departmental Working Papers with number 0707.
Date of creation: 2007
Date of revision:
Other versions of this item:
- Arnwine, Neil & Yigit, Taner M., 2008. "What Fisher knew about his relation, we sometimes forget," Economics Letters, Elsevier, vol. 101(3), pages 193-195, December.
- NEP-ALL-2007-08-27 (All new papers)
- NEP-HPE-2007-08-27 (History & Philosophy of Economics)
- NEP-PKE-2007-08-27 (Post Keynesian Economics)
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