IDEAS home Printed from https://ideas.repec.org/p/cge/wacage/133.html
   My bibliography  Save this paper

Searching for Irving Fisher

Author

Listed:
  • Mitchener, Kris James

    (University of Warwick)

  • Weidenmier, Marc D

    (Claremont McKenna College)

Abstract

There is a long-standing debate as to whether the Fisher effect operated during the classical gold standard period. We break new ground on this question by developing a market-based measure of inflation expectations during the gold standard. We derive a measure of silver-gold inflation expectations using the interest-rate differential between Austrian silver and gold perpetuity bonds. Our use of the silver-gold interest rate differential is motivated by the fact that both gold and silver served as numeraires in the pre-WWI period, so that a change in the price of either precious metal would impact the prices of all goods and services. The empirical evidence suggests that silver-gold inflation expectations exhibited significant persistence at the weekly, monthly, and annual frequencies. Further, we find that there is a one-to-one relationship between silver-gold inflation expectations and the interest rate on Austrian perpetuity bonds that were denominated in paper currency. The analysis suggests the operation of a Fisher effect during the classical gold standard period.

Suggested Citation

  • Mitchener, Kris James & Weidenmier, Marc D, 2013. "Searching for Irving Fisher," CAGE Online Working Paper Series 133, Competitive Advantage in the Global Economy (CAGE).
  • Handle: RePEc:cge:wacage:133
    as

    Download full text from publisher

    File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/centres/cage/manage/publications/133-mitchener.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Marc Flandreau & Kim Oosterlinck, 2011. "Was the Emergence of the International Gold Standard Expected? Melodramatic Evidence from Indian Government Securities," Working Papers 0005, European Historical Economics Society (EHES).
    2. Barro, Robert J, 1979. "Money and the Price Level under the Gold Standard," Economic Journal, Royal Economic Society, vol. 89(353), pages 13-33, March.
    3. Milton Friedman & Anna J. Schwartz, 1982. "Monetary Trends in the United States and United Kingdom: Their Relation to Income, Prices, and Interest Rates, 1867–1975," NBER Books, National Bureau of Economic Research, Inc, number frie82-2, June.
    4. Bordo, Michael D. & Rockoff, Hugh, 1996. "The Gold Standard as a “Good Housekeeping Seal of Approval”," The Journal of Economic History, Cambridge University Press, vol. 56(02), pages 389-428, June.
    5. Perez, Stephen J & Siegler, Mark V, 2003. " Inflationary Expectations and the Fisher Effect prior to World War I," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(6), pages 947-965, December.
    6. Giuseppe Tullio & Jürgen Wolters, 2007. "Monetary Policy in Austria–Hungary, 1876–1913: An Econometric Analysis of the Determinants of the Central Bank’s Discount Rate and the Liquidity Ratio," Open Economies Review, Springer, vol. 18(5), pages 521-537, November.
    7. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 329-368.
    8. Shiller, Robert J & Siegel, Jeremy J, 1977. "The Gibson Paradox and Historical Movements in Real Interest Rates," Journal of Political Economy, University of Chicago Press, vol. 85(5), pages 891-907, October.
    9. Refet S. Gürkaynak & Brian Sack & Eric Swanson, 2005. "The Sensitivity of Long-Term Interest Rates to Economic News: Evidence and Implications for Macroeconomic Models," American Economic Review, American Economic Association, vol. 95(1), pages 425-436, March.
    10. Robert B. Barsky & J. Bradford De Long, 1991. "Forecasting Pre-World War I Inflation: The Fisher Effect and the Gold Standard," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 815-836.
    11. Flandreau, Marc & Galimard, Christophe & Jobst, Clemens & Nogues-Marco, Pilar, 2006. "The Bell Jar: Commercial Interest Rates between Two Revolutions, 1688-1789," CEPR Discussion Papers 5940, C.E.P.R. Discussion Papers.
    12. Harley, C. Knick, 1977. "The interest rate and prices in Britain, 1873-1913: A study of the Gibson Paradox," Explorations in Economic History, Elsevier, vol. 14(1), pages 69-89, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Fisher effect; inflation expectations; gold standard;

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:cge:wacage:133. 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: (Jane Snape). General contact details of provider: http://edirc.repec.org/data/dewaruk.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.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with 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.