An Empirical Examination of the Fisher Effect in Australia / Frederic S. Mishkin, John Simon.

Format:

Book

Author/Creator:

Mishkin, Frederic S.

Contributor:

National Bureau of Economic Research.

Simon, John.

Series:

Working Paper Series (National Bureau of Economic Research) no. w5080.

NBER working paper series no. w5080

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1995.

Summary:

This paper analyzes the Fisher effect in Australia. Initial testing indicates that both interest rates and inflation contain unit roots. Furthermore, there are indications that the variables have non-standard error processes. To overcome problems associated with this and derive the correct small sample distributions of test statistics we make use of Monte Carlo simulations. These tests indicate that while a long-run Fisher effect seems to exist there is no evidence of a short-run Fisher effect. This suggests that, while short-run changes in interest rates reflect changes in monetary policy, longer-run levels indicate inflationary expectations. Thus, the longer-run level of interest rates should not be used to characterize the stance of monetary policy.

Notes:

Print version record

April 1995.