Searching for Irving Fisher

Kris James Mitchener and Marc D Weidenmier
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Kris James Mitchener: University of Warwick
Marc D Weidenmier: Claremont McKenna College

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: There is a long-standing debate as to whether the Fisher effect operated during the classical gold standard period. We break new ground on this question by developing a market-based measure of inflation expectations during thegold standard. We derive a measure of silver-gold inflation expectations using the interest-rate differential between Austrian silver and gold perpetuity bonds. Our use of the silver-gold interest rate differential is motivated by the fact that both gold and silver served as numeraires in the pre-WWI period, so that a change in the price of either precious metal would impact the prices of all goods and services. The empirical evidence suggests that silver-gold inflation expectations exhibited significant persistence at the weekly, monthly, and annual frequencies. Further, we find that there is a one-to-one relationship between silver-gold inflation expectations and the interest rate on Austrian perpetuity bonds that were denominated in paper currency. The analysis suggests the operation of a Fisher effect during the classical gold standard period.

Keywords: Fisher effect; inflation expectations; gold standard (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:cge:wacage:133

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