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The Fisher Equation Controversy: A Reconciliation of Contradictory Results


  • Jha, R.
  • Sahu, A.P.


This paper re-examines the alternative theoretical predictions in the Fischer equation literature. Theoretical predictions about the response of nominal interest rates to inflation expectations ranges from a partial to complete and more-than-complete adjustment of the nominal interest rate to anticipated inflation. Using a neoclassical monetary growth model, this study demonstrates how Mundell-Tobin, Fischer, Darby-Feldstein, Neilsen-Gandolfi, and Summers effects hold as special cases under specific assumptions about the parameter values of the model; thus suggesting that the magnitude of the response of the nominal interest rate to expected inflation depends on the empirical values of the critical parameters involved.

Suggested Citation

  • Jha, R. & Sahu, A.P., 1989. "The Fisher Equation Controversy: A Reconciliation of Contradictory Results," Working Papers 747, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:747

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    References listed on IDEAS

    1. Mukesh Eswaran & Tracy Lewis, 1985. "Exhaustible Resources and Alternative Equilibrium Concepts," Canadian Journal of Economics, Canadian Economics Association, vol. 18(3), pages 459-473, August.
    2. Hassan Benchekroun & Ngo Van Long, 2006. "The Curse Of Windfall Gains In A Non Renewable Resource Oligopoly ," Australian Economic Papers, Wiley Blackwell, vol. 45(2), pages 99-105, June.
    3. Lozada, Gabriel A., 1993. "Existence and characterization of discrete-time equilibria in extractive industries," Resource and Energy Economics, Elsevier, vol. 15(3), pages 249-254, September.
    4. David Levhari & Leonard J. Mirman, 1980. "The Great Fish War: An Example Using a Dynamic Cournot-Nash Solution," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 322-334, Spring.
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    economic theory ; interest rate ; inflation;


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