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The Postwar Stability of the Fisher Effect
Author(s) -
PEEK JOE,
WILCOX JAMES A.
Publication year - 1983
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1983.tb02286.x
Subject(s) - economics , fisher hypothesis , inflation (cosmology) , nominal interest rate , shock (circulatory) , interest rate , econometrics , stability (learning theory) , monetary economics , aggregate (composite) , fisher equation , real interest rate , medicine , physics , machine learning , theoretical physics , computer science , materials science , composite material
Most research concerning the Fisher relationship has concentrated on the magnitude and significance of the response of nominal interest rates to anticipated inflation. Recently, attention has shifted to the stability of that response. According to previous estimates, the impact of anticipated inflation on interest rates varies substantially over time. By extending a standard model to include tax and aggregate supply shock effects, we are able to reduce such instability considerably. Our results also reveal that increased foreign demand for bonds lowers the interest rate.