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The Fisher Equation: A Nonlinear Panel Data Approach

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  • Dong-Hyeon Kim
  • Shu-Chin Lin
  • Joyce Hsieh
  • Yu-Bo Suen

Abstract

This article reinvestigates the Fisher equation. Using the panel smooth transition regression (PSTR) model, it was found that there is a significant regime-switching effect concerning the impact of inflation on interest rates. Specifically, inflation is found to raise the interest rates and the effect becomes stronger in magnitude with inflation. However, the data do not provide evidence in support of the one-for-one Fisher effect. The evidence is robust to interest rates with different maturities and subsamples.

Suggested Citation

  • Dong-Hyeon Kim & Shu-Chin Lin & Joyce Hsieh & Yu-Bo Suen, 2018. "The Fisher Equation: A Nonlinear Panel Data Approach," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(1), pages 162-180, January.
    • Handle: RePEc:mes:emfitr:v:54:y:2018:i:1:p:162-180
    DOI: 10.1080/1540496X.2016.1245138
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    Cited by:

    1. Sunal, Onur, 2022. "The efficiency of primary sovereign bond markets in Turkey: The so-called Fisher puzzle reconsidered," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 255-261.
    2. Hüseyin Şen & Ayşe Kaya & Savaş Kaptan & Metehan Cömert, 2019. "Interest rates, inflation, and exchange rates in fragile EMEs: A fresh look at the long-run interrelationships," Working Papers halshs-02095652, HAL.
    3. Andrew Phiri, 2023. "Fisher’s hypothesis in time–frequency space: a premier using South Africa as a case study," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(5), pages 4255-4284, October.
    4. Andrew Phiri & Lutho Mbekeni, 2021. "Fisher’s hypothesis, survey-based expectations and asymmetric adjustments: Empirical evidence from South Africa," International Economics and Economic Policy, Springer, vol. 18(4), pages 825-846, October.
    5. Piñeiro-Chousa, Juan & López-Cabarcos, M. Ángeles & Šević, Aleksandar, 2022. "Green bond market and Sentiment: Is there a switching Behaviour?," Journal of Business Research, Elsevier, vol. 141(C), pages 520-527.

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