An analysis of the ex post Fisher hypothesis at short and long term

This paper tests the Fisher effect. The analysis is applied to the U.S.A. It contributes to the existing empirical literature in three ways. First, it considers a panel of short term and long term real interest rates between 1960 and 2008. Second, it explores both the presence of unit root and structural changes in real interest rates, by allowing for interaction between these two assumptions as suggested by the recent work of Lee and Strazicich. The third contribution consists in testing formally for the number of breaks using Bai and Perron (1998, 2003) test.