Long- and short-run Fisher effects: new tests and new results

Jeung-Lak Lee, Carolyn Clark and Sung Ahn

Applied Economics, 1998, vol. 30, issue 1, 113-124

Abstract: We find Fisher effects, both long- and short-run, in our full sample period and in the lengthy first sub-period, using Mishkin's monthly data for Treasury bill yields and the corresponding inflation rate. Recently developed cointegration techniques (Ahn and Reinsel, 1990; Reinsel and Ahn, 1992) are used to detect a long-run Fisher effect. The short-run effect is analysed within a cointegration framework, using a Granger causality test that we developed. In the two more recent, but comparatively short sub-periods since October 1979, our results indicate the Fisher effect is not present in either long- or short-run form. These methodologies and results differ from the conclusions of Mishkin's (1992) recent study.

Date: 1998
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DOI: 10.1080/000368498326209

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