Fisher equations inverted and not

Thies, Clifford F.; Crawford, Robert G.

doi:10.1007/bf02920759

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Conceptual Background and The Model1

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Cited by 4 publications

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“…Then a problematic case arises, since testing a2' = -1 cannot discriminate between the inverted and standard Fisher hypotheses. A similar situation is illustrated in Thies and Crawford (1997).…”

Section: Conceptual Background and The Modelsupporting

confidence: 58%

The Inverted Fisher Hypothesis: Inflation Forecastability and Asset Substitution

Choi¹

2002

IMF Econ Rev

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The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMP or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.This paper examines the implications of inflation persistence for the inverted Fisher hypothesis that nominal interest rates do not adjust to inflation because of a high degree of substitutability between money and bonds. It is emphasized that the substitutability between nominal assets and capital renders the hypothesis inconsistent with the data when inflation persistence is high. Using a switching regression model, the analysis allows the reflection of inflation in interest rates to vary according to the degree of inflation persistence or forecastability. The hypothesis is supported by U.S. data only when inflation forecastability is below a certain threshold.

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Section: Conceptual Background and The Modelsupporting

confidence: 58%