Testing fisher effect for the USA: application of nonlinear ARDL model

Serdar Ongan and Ismet Gocer

Journal of Financial Economic Policy, 2019, vol. 12, issue 2, 293-304

Abstract: Purpose - This paper aims to investigate the presence of the Fisher effect for the USA from a new methodological perspective differing it from all previous studies using the common linear representation of the Fisher equation. Design/methodology/approach - The nonlinear ARDL model, recently developed by Shinet al.(2014), is applied for the 10-year US Government bond rates over the period of 1985M1-2017M10. Findings - The empirical findings indicate that the US Federal Reserve (FED) is a more predominant arbiter in the determination of interest rates during periods of declining inflation rates than periods of rising inflation rates. This finding may allow the FED to apply more proactive and prudent monetary policy. Additionally, this study newly describes and introduces a different version of the partial Fisher effect and extends the Fisher equation to some degree in terms of the partial Fisher effect. Originality/value - To the best the authors’ knowledge, this method is applied for the first time in testing the Fisher effect for the USA.

Keywords: Monetary policy; Macroeconomics and monetary economics; Money and interest rates; Fisher effect; Nonlinear and linear ARDL models; US treasury bonds; Asymmetry; Symmetry; E0; E40; E43; G12 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfeppp:jfep-09-2018-0127

DOI: 10.1108/JFEP-09-2018-0127

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