IDEAS home Printed from https://ideas.repec.org/a/bla/jfinan/v54y1999i1p307-317.html
   My bibliography  Save this article

Are Tax Effects Important in the Long-Run Fisher Relationship? Evidence from the Municipal Bond Market

Author

Listed:
  • William J. Crowder

    (University of Texas at Arlington,)

  • Mark E. Wohar

    (University of Nebraska at Omaha)

Abstract

Are nominal bonds appropriately discounted for taxes? Empirical estimates of the response of nominal interest rates to changes in inflation, the Fisher effect, have failed to produce a definitive answer. Four reasons have been put forward as possible explanations: (i) Tobin effects, (ii) fiscal illusion, (iii) peso problems, and (iv) different estimators. Utilizing data on taxable and tax-exempt bond interest rates and several different estimators, we find that the Fisher effect estimates are always larger for the taxable bond relative to the tax-exempt bond, suggesting that fiscal illusion and different estimators cannot account for the previous results. Copyright The American Finance Association 1999.

Suggested Citation

  • William J. Crowder & Mark E. Wohar, 1999. "Are Tax Effects Important in the Long-Run Fisher Relationship? Evidence from the Municipal Bond Market," Journal of Finance, American Finance Association, vol. 54(1), pages 307-317, February.
  • Handle: RePEc:bla:jfinan:v:54:y:1999:i:1:p:307-317
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/servlet/useragent?func=synergy&synergyAction=showTOC&journalCode=jofi&volume=54&issue=1&year=1999&part=null
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Crowder, William J. & Wohar, Mark E., 1999. "The changing long-run linkage between yields on Treasury and municipal bonds and the 1986 Tax Act," Review of Financial Economics, Elsevier, vol. 8(2), pages 101-119.
    2. Vicente Martínez, Eva, 2006. "Properties of two U.S. inflation measures (1985-2005)," DES - Working Papers. Statistics and Econometrics. WS ws066818, Universidad Carlos III de Madrid. Departamento de Estadística.
    3. Christopher J. Neely & David E. Rapach, 2008. "Real interest rate persistence: evidence and implications," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 609-642.
    4. Christina Christou & Rangan Gupta & Wendy Nyakabawo & Mark E. Wohar, 2017. "Do House Prices Hedge Inflation in the US? A Quantile Cointegration Approach," Working Papers 201707, University of Pretoria, Department of Economics.
    5. Andrew Phiri & Peter Lusanga, 2011. "Can asymmetries account for the empirical failure of the Fisher effect in South Africa?," Economics Bulletin, AccessEcon, vol. 31(3), pages 1968-1979.
    6. Margaret Lamb & Andrew Lymer, 1999. "Taxation research in an accounting context: future prospects and interdisciplinary perspectives," European Accounting Review, Taylor & Francis Journals, vol. 8(4), pages 749-776.
    7. Guglielmo Maria Caporale & Luis A. Gil-Alana, 2017. "Testing the Fisher Hypothesis in the G-7 Countries Using I(d) Techniques," Discussion Papers of DIW Berlin 1667, DIW Berlin, German Institute for Economic Research.
    8. James R. Rhodes, 2006. "DEVOLUTION OF THE FISHER EQUATION: Rational Appreciation to Money Illusion," GRIPS Discussion Papers 07-05, National Graduate Institute for Policy Studies, revised Sep 2007.
    9. Pavol Povala & Anna Cieslak, 2012. "Understanding bond risk premia," 2012 Meeting Papers 771, Society for Economic Dynamics.
    10. Anari, Ali & Kolari, James, 2001. "Stock Prices and Inflation," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 24(4), pages 587-602, Winter.
    11. Maydew, Edward L., 2001. "Empirical tax research in accounting: A discussion," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 389-403, September.
    12. repec:eee:riibaf:v:42:y:2017:i:c:p:1089-1095 is not listed on IDEAS
    13. Anari, Ali & Kolari, James, 2016. "Dynamics of interest and inflation rates," Journal of Empirical Finance, Elsevier, vol. 39(PA), pages 129-144.
    14. Tsong, Ching-Chuan & Lee, Cheng-Feng, 2011. "Asymmetric inflation dynamics: Evidence from quantile regression analysis," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 668-680.
    15. Chang, Tsangyao & Ranjbar, Omid & Tang, D.P., 2013. "Revisiting the mean reversion of inflation rates for 22 OECD countries," Economic Modelling, Elsevier, vol. 30(C), pages 245-252.
    16. Henry, Olan T. & Shields, Kalvinder, 2004. "Is there a unit root in inflation?," Journal of Macroeconomics, Elsevier, vol. 26(3), pages 481-500, September.
    17. Çiçek, Serkan & Akar, Cüneyt, 2013. "The asymmetry of inflation adjustment in Turkey," Economic Modelling, Elsevier, vol. 31(C), pages 104-118.
    18. Rapach, David E. & Weber, Christian E., 2004. "Are real interest rates really nonstationary? New evidence from tests with good size and power," Journal of Macroeconomics, Elsevier, vol. 26(3), pages 409-430, September.
    19. Augustine Arize & John Malindretos & Kiseok Nam, 2005. "Inflation and Structural Change in 50 Developing Countries," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 33(4), pages 461-471, December.
    20. Ka-Fu Wong & Hai-Jun Wu, 2003. "Testing Fisher hypothesis in long horizons for G7 and eight Asian countries.1," Applied Economics Letters, Taylor & Francis Journals, vol. 10(14), pages 917-923.
    21. Arize, Augustine C. & Malindretos, John, 2012. "Nonstationarity and nonlinearity in inflation rate: Some further evidence," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 224-234.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jfinan:v:54:y:1999:i:1:p:307-317. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/afaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.