This paper critically re-examines theory and evidence on the relation- ship between interest rates and inflation. It concludes that there is no evidence that interest rates respond to inflation in the way that classical or Keynesian theories suggest, For the period 1860-1940, it does not appear...

Sudden Stops are financial crises defined by a large, sudden current-account reversal. They occur in both advanced and emerging economies and result in deep recessions, collapsing asset prices, and real exchange-rate depreciations. They are preceded by economic expansions, current-account...

The Fisher relation (FR) is a key theoretical relation that underlies many important results in economics and finance. The theoretical FR implies that the two variables of the nominal interest rate and the expected inflation are cointegrated. In practice, however, real data often fail to confirm...

The basic puzzle about the so-called Fisher effect, in which movements in short-term interest rates primarily reflect fluctuations in expected inflation, is why a strong Fisher effect occurs only for certain periods but not for others. This paper resolves this puzzle by reexamining the...

We consider the puzzling behavior of interest rates and inflation in the United States and the United Kingdom between 1879 and 1913. A deflationary regime prior to 1896 was followed by an inflationary one from 1896 until the beginning of World War I; the average inflation rate was 3.8 percentage...

This note tests the hypothesis that nominal interest differentials between similar assets denominated in different currencies can be explained entirely by the expected change in the exchange rate over the holding period. This proposition, often called the "Fisher open" hypothesis or the...

In this paper, we examine the ability of Fisher effect to describe the subjective behaviour of monetary policy responses for nations constrained by global factors. We developed and estimated a simple DSGE model for appraising the consequence of an integrated financial market predictor on...

For the period 1860 to 1939, the simple correlation of the U.S. commercial paper rate with the contemporaneous inflation rate is -.17. The corresponding correlation for the period 1950 to 1979 is .71. Inflation evolved from essentially a white noise process in the pre-World War I years to a...

This paper examines the implications of inflation persistence for the inverted Fisher hypothesis that nominal interest rates do not adjust to inflation because of a high degree of substitutability between money and bonds. It is emphasized that the substitutability between nominal assets and...

This paper is an attempt to trace the relationship between interest rates and rates of inflation in the economy of Bangladesh. In view of this, a time series approach is considered to examine the empirical evidence of Fisher's effect in the country. By applying OLS and Unit Root test, the...

This study reconsiders the Fisher effect for the UK from a different methodological perspective. To this aim, the nonlinear ARDL model recently developed by Shin et al. (2014), is applied over the periods of 1995M1-2008M9 and 2008M10-2018M1. This model decomposes the changes in original...

This study focuses on the consensus forecasts from the Survey of Professional Forecasters (SPF) for 1993-2017. These include the SPF forecasts of US 10-year Treasury rate (TBR), Moody's Aaa corporate bond rate (Aaa), CPI inflation, and real GDP growth. We show that both SPF and random walk...

This study focuses on the consensus forecasts from the Survey of Professional Forecasters (SPF) for 1993-2017. These include the SPF forecasts of US 10-year Treasury rate (TBR), Moody's Aaa corporate bond rate (Aaa), CPI inflation, and real GDP growth. We show that both SPF and random walk...

Using annual data over a long time horizon from 1900 to 2000 for the UK, this study finds the existence of a Fisher relation via Johansen cointegration tests. The cointegrating relationship between the two variables suggests a significant long-run equilibrium with a positive coefficient of more...

In this study, we aim to investigate the relationship between interest rate and inflation rate in the context of the Fisher effect hypothesis for Fragile five economies. In this regard, we employ recently developed panel co-integration and panel causality test methods. The bi-directional causal...

This paper investigates whether permanent monetary tightenings increase inflation in the short run. It estimates, using U.S. data, an empirical and a New-Keynesian model driven by transitory and permanent monetary and real shocks. Temporary increases in the nominal interest-rate lead, in...

This paper investigates whether permanent monetary tightenings increase inflation in the short run. It estimates, using U.S. data, an empirical and a New-Keynesian model driven by transitory and permanent monetary and real shocks. Temporary increases in the nominal interest-rate lead, in...

This paper uses the Fisher equation relating the nominal interest rate to the real interest rate and expected inflation to provide a deeper explanation of the financial crisis of 2008 and the subsequent recovery than attributing it to the bursting of the housing-price bubble. The paper...

The Fisher relation, describing a one-for-one relation between nominal interest rate and expected inflation, underlies many important results in economics and finance. The Fisher relation is a conceptually simple relation, but the empirical evidence of it is more or less complicated with mixed...

"The notion that expectations play a key role in economic decision making is a very old one. Over the past 100 years, major advances in the application of this insight in the formulation of economic models have been made in various subfields of economics. The concept of extrapolation, the idea...

As one of the first texts to take a behavioral approach to macroeconomic expectations, this book introduces a new way of doing economics. Rötheli uses cognitive psychology in a bottom-up method of modeling macroeconomic expectations. His research is based on laboratory experiments and...

This paper revisits the Fisher hypothesis by estimating fractional integration and cointegration models that are more general than the standard ones based on the classical I(0)/I(1) dichotomy. Two sets of results are obtained under the alternative assumptions of white noise and Bloomfield (1973)...

This paper revisits the Fisher hypothesis by estimating fractional integration and cointegration models that are more general than the standard ones based on the classical I(0)/I(1) dichotomy. Two sets of results are obtained under the alternative assumptions of white noise and Bloomfield (1973)...

This study reconsiders the common unit root/co-integration approach to test for the Fisher effect for the economies of the G7 countries. We first show that nominal interest and inflation rates are better represented as I(0) variables. Later, we use the Bai-Perron procedure to show the existence...

I investigate the effects of an increase in the nominal interest rate on inflation and output in the United States and Japan during the postwar period. I postulate a structural autoregressive model that allows for transitory and permanent nominal and real shocks. I find that nominal...

The neo-Fisherian view does not consider a negative interest rate gap a prerequisite for boosting inflation. Instead, a negative interest rate gap is said to lower inflation. We discuss this counterintuitive response - known as the Fisher paradox - in a prototypical new-Keynesian model. We draw...

This paper revisits the Fisher hypothesis by estimating fractional integration and cointegration models that are more general than the standard ones based on the classical I(0)/I(1) dichotomy. Two sets of results are obtained under the alternative assumptions of white noise and Bloomfield (1973)...

This paper revisits the Fisher hypothesis by estimating fractional integration and cointegration models that are more general than the standard ones based on the classical I(0)/I(1) dichotomy. Two sets of results are obtained under the alternative assumptions of white noise and Bloomfield (1973)...

This paper is an attempt to examine the empirical evidence of International Fisher Effect (IFE) between Bangladesh and its two other major trading partners, China and India. The IFE uses interest rate differentials to explain why exchange rates change over time. A time series approach is...

I investigate the effects of an increase in the nominal interest rate on inflation and output in the United States and Japan during the postwar period. I postulate a structural autoregressive model that allows for transitory and permanent nominal and real shocks. I find that nominal...