Fisher Effect in Post-Unification Germany - Insights for Firms, Central Banks and Governments

Cordelia Friesendorf and S. Raja Sethu Durai

Research Journal for Applied Management (RJAM), 2021, vol. 2, issue 1, 53-67

Abstract: Irving Fisher's (1930) hypothesis is a pillar in international economic theory used by Central banks and financial ministries to assess the impact of real and nominal variables that are essential for firm-level growth. This paper examines the validity of generalized Fisher's hypothesis for post-unification Germany for the time-period beginning January 1991 until March 2020 through a frequency-time domain framework using continuous wavelet analysis. We make two inferences from the empirical analysis; first, the generalized Fisher hypothesis holds perfectly well for the study period. Second, the relationship between real stock return and inflation exhibited in the post-financial crisis period is attributed to the indirect growth effects of the Germany's overall domestic product. The results provide valuable insights for firms, banks and governments.

Keywords: Fisher hypothesis; real stock return; inflation; wavelet analysis; post-unification (search for similar items in EconPapers)
JEL-codes: E43 E44 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ismrja:324718

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