The fisher effect: A kalman filter approach to detecting structural change

Abdulnasser Hatemi-J, Manuchehr Irandoust

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)

Abstract

This article uses quarterly data on short-run nominal interest rates and inflation rates over the last four or three decades collected from Australia, Japan, Malaysia and Singapore to test whether the Fisher relation has empirical support. Since meaningful Fisher effect tests critically depend on the integration and cointegration properties of the variables, we present some empirical evidence on these issues and we also apply the Kalman filter to estimate the time-varying parameters. The results show that the data are generally rejecting a full Fisher effect. This implies that nominal interest rates do not respond point-for-point to changes in the expected inflation rates. The possible reasons for the inability to detect a full Fisher effect are also discussed.

Original languageEnglish
Pages (from-to)619-624
Number of pages6
JournalApplied Economics Letters
Volume15
Issue number8
DOIs
Publication statusPublished - Jun 1 2008
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics

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