Download or read book The Fisher Hypothesis and Nominal Interest Rate Decomposition written by and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Using Treasury Bill nominal interest rates data for the sample period 1957Q1-2005Q1, we apply the structural VAR methodology developed by Blanchard and Quah (1989) to achieve twofold objective. First of all, we are interested to estimate the time-path of the unobservable variables that, according to the Fisherian theory of interest, determine fluctuations of the nominal interest rates, i.e. the expected inflation and the ex-ante real interest rate components. Secondly, we try to solve the puzzling evidence regarding the apparently nonstationarity of the real interest rates. After accounting for potential infrequent mean shifts in the ex-post real interest rate series, we impose valid long-run neutrality restriction to obtain Structural (identified) VAR and test the magnitude of the Fisher effect over the entire sample of analysis.
Download or read book The Non adjustment of Nominal Interest Rates written by Lawrence H. Summers and published by . This book was released on 1982 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper critically re-examines theory and evidence on the relation- ship between interest rates and inflation. It concludes that there is no evidence that interest rates respond to inflation in the way that classical or Keynesian theories suggest, For the period 1860-1940, it does not appear that inflationary expectations had any significant impact on rates of inflation in the short or long run. During the post-war period interest rates do appear to be affected by inflation. However, the effect is much smaller than any theory which recognizes tax effects would predict. Further- more, all the power in the inflation interest rate relationship comes from the 1965-1971 period. Within the 1950's or 1970's, the relationship is both statistically and substantively insignificant. Various explanations for the failure of the theoretically predicted relationship to hold are considered. The relationship between inflation and interest rates remains weak at the even low frequencies. This is taken as evidence that cyclical factors or errors in measuring inflation expectations cannot account for the failure of the results to bear out Fisher's theoretical prediction. Rather, comparison of real interest rates and stock market yields suggests that Fisher was correct in pointing to money illusion as the cause of the imperfect adjustment of interest rates to expected inflation.
Download or read book The Nonadjustment of Nominal Interest Rates written by Lawrence H. Summers and published by . This book was released on 1984 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper critically re-examines theory and evidence on the relation- ship between interest rates and inflation. It concludes that there is no evidence that interest rates respond to inflation in the way that classical or Keynesian theories suggest, For the period 1860-1940, it does not appear that inflationary expectations had any significant impact on rates of inflation in the short or long run. During the post-war period interest rates do appear to be affected by inflation. However, the effect is much smaller than any theory which recognizes tax effects would predict. Further- more, all the power in the inflation interest rate relationship comes from the 1965-1971 period. Within the 1950's or 1970's, the relationship is both statistically and substantively insignificant. Various explanations for the failure of the theoretically predicted relationship to hold are considered. The relationship between inflation and interest rates remains weak at the even low frequencies. This is taken as evidence that cyclical factors or errors in measuring inflation expectations cannot account for the failure of the results to bear out Fisher's theoretical prediction. Rather, comparison of real interest rates and stock market yields suggests that Fisher was correct in pointing to money illusion as the cause of the imperfect adjustment of interest rates to expected inflation
Download or read book Essays on Inflation and Nominal Interest Rates written by Heather Lee Rukmani Tierney and published by . This book was released on 2005 with total page 252 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Long Run Relationship between Nominal Interest Rates and Inflation written by William J. Crowder and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The empirical literature examining the Fisher equation has produced results that are generally inconsistent with the simple textbook representation. Much of this evidence is obtained from statistical analysis that fails to recognize that the nominal interest rate and expected inflation may be modeled as distinct nonstationary series that share a common stochastic trend. Using a fully efficient estimator of theimplied cointegration vector we find evidence of a postwar Fisher relation that is consistent with the standard textbook representation even when taxes on interest income are taken into account. Dynamic analysis based on this long- run relation identifies the common source of the instability (nonstationarity) in the system of nominal interest rates and inflation as the accumulation of inflation innovations. The dynamic response of the system to these shocks is examined by distinguishing the shock that leaves a permanent imprint on the system from the shock that has only a transitory effect.
Download or read book The Non adjustment of Nominal Interest Rates written by and published by . This book was released on 1982 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Nominal Interest Rate and Inflation written by Chang Mo Ahn and published by . This book was released on 1987 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Real Interest Rates and Inflation written by Shmuel Kandel (deceased) and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a method of measuring ex-ante real interest rates using prices of index and nominal bonds. Employing this method and newly available data, we directly test the Fisher hypothesis that the real rate of interest is independent of inflation expectations. We find a negative correlation between ex-ante real interest rates and expected inflation. This contradicts the Fisher hypothesis but is consistent with the theories of Mundell and Tobin, Darby and Feldstein, and Stulz. We also find that nominal interest rates include an inflation risk premium that is positively related to a proxy for inflation uncertainty.
Download or read book The Fisher Effect in the Spanish Case written by Francisco Jareño and published by . This book was released on 2015 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: We revise previous literature about Fisher effect, in order to check if the majority of nominal interest rates movements are caused by inflation rate fluctuations, remaining constant the real interest rate. Finally, we analyze the Fisher effect in the Spanish case with a preliminary analysis in order to validate future studies.
Download or read book Rational Expectations Inflation and the Nominal Interest Rate written by Jean A. Crockett and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: There is a substantial empirical literature, beginning with Fama [1975], that utilizes regressions of the inflation rate in a given period on initial rates (or inflation differentials on the slope of the initial yield curve) to test the Fisher hypothesis and/or to provide forecasts of inflation. Both uses depend critically on the maintained hypothesis that asset market prices fully incorporate all relevant current information about future yields. This paper will investigate the plausibility of the rational expectations hypothesis for real returns in markets for one- period default-free bonds, will show that under normal macroeconomic assumptions it cannot be expected to hold, and will consider the consequences of its failure for the interpretation of empirical results.
Download or read book Real and Nominal Interest Rates Under Uncertainty written by Simon Benninga and published by . This book was released on 1986 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Three Essays on Financial Markets and the Macroeconomy written by Shingo Goto and published by . This book was released on 2001 with total page 506 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Applied Intermediate Macroeconomics written by Kevin D. Hoover and published by Cambridge University Press. This book was released on 2012 with total page 941 pages. Available in PDF, EPUB and Kindle. Book excerpt: A complete course in applied macroeconomics at the intermediate level that emphasizes the application of economic theory to real-world data and policy.
Download or read book Inflation written by Irving Fisher and published by . This book was released on 1933 with total page 112 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essays on Philosophy and Economic Methodology written by Daniel M. Hausman and published by Cambridge University Press. This book was released on 1992-11-27 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt: This collection brings together the essays of one of the foremost American philosophers of economics. Cumulatively they offer fresh perspectives on foundational questions such as: what sort of science is economics? and how successful can economists be in acquiring knowledge of their subject matter?
Download or read book Long Run Relatinship between Interest Rates and Inflation written by M. Thenmozhi and published by . This book was released on 2005 with total page 10 pages. Available in PDF, EPUB and Kindle. Book excerpt: The extent to which movements in nominal interest rates change with anticipated inflation has been keenly researched ever since Fisher (1930) first pointed out that efficient capital markets should compensate for changes in the purchasing power of money. In the Indian context, this relationship was not given much focus until the beginning of 1990s due to the administered interest rate mechanism. Since the beginning of economic reforms and the liberalization of capital market, the interest rates were allowed to float, except the Bank Rate and the interest rate on savings deposits and the question of determining the interest rates became a big issue. Hence, this study examines the short-run and long run comovements of interest rates and inflation using cointegration analysis and error correction model. The results show that inflation causes 91-day Treasury bill yield and MIBOR indicating that the interest rates are now more market determined and there is evidence of Fisher's hypothesis.
Download or read book The Fisher Hypothesis and Inflation Persistence written by Wensheng Peng and published by International Monetary Fund. This book was released on 1995-11 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
