The Fisher Hypothesis and Inflation Persistence: Evidence From Five Major Industrial Countries

November 1, 1995

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Format: Chicago

Wensheng Peng. The Fisher Hypothesis and Inflation Persistence: Evidence From Five Major Industrial Countries, (USA: International Monetary Fund, 1995) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper presents an empirical evaluation of the strength of the Fisher effect which predicts a positive relationship between the nominal interest rate and inflation in the postwar period in the five major industrial countries, utilizing recently developed time series techniques. The results suggest that the Fisher effect is stronger in France, the United Kingdom, and the United States than in Germany and Japan. It is argued that the differences in the linkage between the interest rate and the inflation rate as between the two groups of countries are reflected in the time series properties of the inflation rates, which are, in turn, partly attributable to the different extent to which monetary authorities accommodated inflationary shocks. The empirical results have a number of implications for the long-term trend in the SDR interest rate and for the financing of the Fund’s operations.

Subject: Business cycles, Economic growth, Financial services, Inflation, Inflation persistence, Prices, Real interest rates, SDR interest rate

Keywords: Anti-inflation commitment, Business cycles, Component interest rates, Fisher effect, Fisher hypothesis, Inflation, Inflation persistence, Interest rate, Interest rate data, Interest rate observation, Interest rates in the United States, Nominal interest rate, Real interest rates, Real rate of interest, SDR interest rate, Short-run interest rate, Time series technique, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1995/118
Stock No:

WPIEA1181995
ISBN:

9781451940824
ISSN:

1018-5941

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