Rational expectations and the Fisher effect: implications of monetary regime shifts
AbstractThis paper develops a simple rational expectations model of the inflation process that is used to test the Fisher effect. The model emphasizes the link between money and expected inflation, and hence the monetary regime followed by the central bank. The model is estimated with U.S. data over the 1953-1986 period. We find that instability in the observed Fisher effect is associated with monetary regime shifts, and that the forecastability of money under different money regimes is an important determinant of the extent to which the Fisher effect is statistically observable.
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Bibliographic InfoPaper provided by Federal Reserve Bank of San Francisco in its series Working Papers in Applied Economic Theory with number 86-11.
Date of creation: 1986
Date of revision:
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- Bandholz, Harm & Clostermann, Jörg & Seitz, Franz, 2007.
"Explaining the US bond yield conundrum,"
2, University of Applied Sciences Amberg-Weiden (HAW).
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