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Testing for a nonlinear Fisher relationship

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  • Frederick H Wallace

    (Universidad de Quintana Roo)

Abstract

Empirical evidence regarding the Fisher effect is mixed. One reason may be a nonlinear adjustment process in the real interest rate. The nonlinear unit root test proposed by Sollis, Leybourne, and Newbold (Journal of Money, Credit, and Banking 34: 686-700, 2002) is used to test for stationarity of the U.S. real interest rate over the 1934:01-2011:02 period and selected subperiods. The unit root null in the real rate of interest can be rejected over the full sample, evidence of a Fisher effect. Weaker evidence of a Fisher relation is found in the subsample for 1934:01-1959:12 for which the unit root null can be rejected for one measure of the real interest rate. However, there is no indication of a Fisher effect for subperiods starting in 1960 or later. A conjecture is that temporal aggregation of the interest rate data may explain the different results, but the findings are also consistent with other explanations.

Suggested Citation

  • Frederick H Wallace, 2012. "Testing for a nonlinear Fisher relationship," Economics Bulletin, AccessEcon, vol. 32(1), pages 823-829.
    • Handle: RePEc:ebl:ecbull:eb-11-00607
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Fisher effect; nonlinear unit root; U.S. real interest rate;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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