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Fisher Hypothesis in Japan: Analysis of Long‐term Interest Rates under Different Monetary Policy Regimes

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  • Takayasu Ito

Abstract

This paper investigates the validity of the Fisher hypothesis in Japanese long‐term interest rates (two, three, four, five, seven and ten years) using non‐stationary time series models. Initially, the entire sample period (October 1987–June 2006) is investigated. Then the samples, divided into three segments depending on each period's monetary policy regimes, are investigated. Thus, the asymmetric impacts of inflation expectation on Japanese long‐term interest rates can be investigated. The first period examined is from October 1987–June 1991. The second period is from July 1991–July 2000. The third period is from March 2001–June 2006. In the first period monetary policy is tightening, but in the second and third periods it is easing. Thus it is concluded that the Fisher hypothesis is valid only in all maturities of long‐term interest rates in the first period. However, it does not hold in any of the maturities in the entire sample period or in the second and third periods.

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  • Takayasu Ito, 2009. "Fisher Hypothesis in Japan: Analysis of Long‐term Interest Rates under Different Monetary Policy Regimes," The World Economy, Wiley Blackwell, vol. 32(7), pages 1019-1035, July.
    • Handle: RePEc:bla:worlde:v:32:y:2009:i:7:p:1019-1035
    DOI: 10.1111/j.1467-9701.2009.01193.x
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    2. Bosupeng, Mpho & Biza-Khupe, Simangaliso, 2015. "The Impact of Money Supply Volatility on the Fisher Effect –A Botswana Empirical Perspective," MPRA Paper 77920, University Library of Munich, Germany, revised 2015.
    3. Lyócsa, Štefan & Výrost, Tomáš & Baumöhl, Eduard, 2011. "Unit-root and stationarity testing with empirical application on industrial production of CEE-4 countries," MPRA Paper 29648, University Library of Munich, Germany.
    4. Utku ALTUNÖZ, 2018. "Investigating the Presence of Fisher Effect for the China Economy," Sosyoekonomi Journal, Sosyoekonomi Society, issue 26(35).
    5. Ercan Özen & Letife Özdemir & Simon Grima, 2020. "The Relationship between the Exchange Rate, Interest Rate and Inflation: The Case of Turkey," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 67(2), pages 259-275, March.
    6. Somayeh Madadpour & Mohsen Asgari, 2019. "The puzzling relationship between stocks return and inflation: a review article," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 66(2), pages 115-145, June.
    7. 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.
    8. Muhammed TIRAŞOĞLU, 2018. "Fisher Hipotezinin MINT Ülkeleri İçin İncelenmesi: Eşik Değerli Adl Eşbütünleşme Testi Yaklaşımı," EKOIST Journal of Econometrics and Statistics, Istanbul University, Faculty of Economics, vol. 14(28), pages 31-43, December.
    9. Bosupeng, Mpho, 2016. "On The Fisher Effect: A Review," MPRA Paper 77916, University Library of Munich, Germany, revised 2016.
    10. Burcu Kiran, 2013. "A fractional cointegration analysis of Fisher hypothesis: evidence from Turkey," Quality & Quantity: International Journal of Methodology, Springer, vol. 47(2), pages 1077-1084, February.

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