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Neo‐Fisherism and inflation control
Author(s) -
Williamson Stephen
Publication year - 2019
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12403
Subject(s) - inflation (cosmology) , economics , nominal interest rate , real interest rate , interest rate , keynesian economics , mainstream , fisher hypothesis , inflation targeting , monetary economics , sign (mathematics) , central bank , monetary policy , macroeconomics , control (management) , political science , mathematics , law , mathematical analysis , physics , theoretical physics , management
According to conventional central banking wisdom, an inflation‐targeting central bank should increase (decrease) its nominal interest rate target when inflation is above (below) its target. According to neo‐Fisherites, conventional central bankers have the sign wrong. Essentially all mainstream macroeconomic models tell us that increases in nominal interest rates increase inflation—in the short run and in the long run. This paper reviews neo‐Fisherian theory and evidence and addresses issues relating to inflation control in low real interest rate environments.