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On The Fisher Effect: A Review

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  • Bosupeng, Mpho

Abstract

The Fisher effect proposes that in the long run, nominal interest rates trend positively with inflation. In numerous studies the long run Fisher effect has been proved several times as compared to the short run Fisher effect phenomenon. The reason is in the long run, interest rates exhibit minimum volatility therefore resulting in the long run association. Even though the literature has been impressive in terms of validating the hypothesis, many central banks and policy makers have been lost in the lurch regarding the overall standpoint of the Fisher parity. This paper reviews the Fisher effect and examines factors that impinge on the hypothesis namely: inflation targeting, data set range and the regulation of the financial system.

Suggested Citation

  • Bosupeng, Mpho, 2016. "On The Fisher Effect: A Review," MPRA Paper 77916, University Library of Munich, Germany, revised 2016.
    • Handle: RePEc:pra:mprapa:77916
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    More about this item

    Keywords

    Fisher effect; interest rates; inflation;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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