The Fisher hypothesis: a multi-country analysis

Berument, Hakan; Jelassi, Mohamed Mehdi

doi:10.1080/00036840110115118

Cited by 73 publications

(31 citation statements)

References 35 publications

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“…Take, for example, the study of Berument and Jelassi (2002), who examined a panel of monthly data spanning roughly the period 1957-1998 across Table VII. There are two types of estimators, which we will describe here briefly.…”

Section: The Full Fisher Effectmentioning

confidence: 99%

Panel cointegration tests of the Fisher effect

Westerlund

2007

J of Applied Econometrics

819

429

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SUMMARYMost empirical evidence suggests that the Fisher effect, stating that inflation and nominal interest rates should cointegrate with a unit slope on inflation, does not hold, a finding at odds with many theoretical models. This paper argues that these results can be attributed in part to the low power of univariate tests, and that the use of panel data can generate more powerful tests. For this purpose, we propose two new panel cointegration tests that can be applied under very general conditions, and that are shown by simulation to be more powerful than other existing tests. These tests are applied to a panel of quarterly data covering 20 OECD countries between 1980 and 2004. The evidence suggest that the Fisher effect cannot be rejected once the panel evidence on cointegration has been taken into account.

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Section: The Full Fisher Effectmentioning

confidence: 99%

Panel cointegration tests of the Fisher effect

Westerlund

2007

J of Applied Econometrics

819

429

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“…Hence, in this paper we use monthly data. Thirdly, to the best of the authors' knowledge, excluding Berument and Jelassi (2002) who include 26 countries in their study, this study is the first to test the Fisher hypothesis for as many as 52 countries within a common framework. This is a novel aspect of the present paper.…”

Section: Introductionmentioning

confidence: 99%

Inflation uncertainty and interest rates: is the Fisher relation universal?

2007

Self Cite

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This paper tests the validity of the Fisher hypothesis, which establishes a positive relation between interest rates and expected inflation, for the G7 countries and 45 developing economies. For this purpose, we estimate a version of the GARCH specification of the hypothesis for all countries included in the sample. We also test the augmented Fisher relation by including the inflation uncertainty in the equation. The simple Fisher relation holds in all G7 countries but in only 23 developing countries. There is a positive and statistically significant relationship between interest rates and inflation uncertainty for six of the G7 and 18 of the developing countries and this relationship is negative for seven developing countries.

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“…By using the data on inflation rates and stock returns, they found support for Fisher hypothesis, as well as a positive relation between long-horizon nominal stock returns and expected inflation but not between long-horizon stock returns and contemporaneous inflation. Berument and Mehdi (2002) examined a multi-country Fisher hypothesis in a sample of 26 developed and developing countries using the instrumental variable method and monthly data in the period from April 1957 till Jun 1981 and end in 1998 (for developed countries) and form May 1957 till February 1985 an end in 1998 (for developing countries). By using the data on Treasury bills rates (or landing rates) and inflation rates, they found support for Fisher hypothesis in a various number of developed and developing countries proving that the Fisher hypothesis holds more for the developed countries than the developing ones.…”

Section: Literature Reviewmentioning

confidence: 99%

“…In addition, there are authors who use overall interest rates (for example on credits, deposits or Treasury bills yields). For additional review, see Ray (2012), Berument and Jelassi (2002), Berument and Mehdi (2002) Berument and Mehdi (2002), Brhel andSmant (2009), Argyro (2010), Ramadanović (2011) etc.…”

Section: Datamentioning

confidence: 99%

Testing the Fisher Effect in Croatia: An Empirical Investigation

Benazić¹

2013

Economic Research-Ekonomska Istraživanja

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In his celebrated book The Theory of Interest Irving Fisher asserted that a percentage increase in the expected rate of inflation would lead to a percentage increase in the nominal interest rates assuming that real interest rate is constant. The so-called Fisher effect suggests that changes in the nominal interest rate reflect the revised inflation expectations; and revised inflation expectations have an impact on the level of the nominal interest rate. Consequently, the monetary authorities should employ strategies that will prevent inflation from rising if nominal interest rates are to be kept at low levels in order to not discourage the borrowing. The aim of this paper is to empirically test the Fisher effect in Croatia using VEC (vector error correction) model. The results suggest that the "full" Fisher effect in Croatia may de facto hold only in the long-run. This paper is organized as follows. Section 2 after the introduction, reviews the literature. Section 3 reviews used data while Section 4 describes methodology, empirical analysis and the results. Finally, Section 5 provides some concluding remarks. ARTICLE INFO

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The Fisher hypothesis: a multi-country analysis

Cited by 73 publications

References 35 publications

Panel cointegration tests of the Fisher effect

Panel cointegration tests of the Fisher effect

Inflation uncertainty and interest rates: is the Fisher relation universal?

Testing the Fisher Effect in Croatia: An Empirical Investigation

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