The Fisher Effect: A Review of the Literature

Arusha Cooray

No 206, Research Papers from Macquarie University, Department of Economics

Abstract: The Fisher hypothesis has been a much debated topic. Over the years the hypothesis debated and the techniques used have changed. While the majority of early studies on the Fisher effect concentrated primarily on confirming the long and distributed lag in expectations formation, subsequent work saw the integration of the Fisher hypothesis with the theories of rational expectations and efficient markets. With the incorporation of these theories in the Fisher hypothesis, the methodological advances involved examining the time series properties of the variables in question. This survey reviews previous work from this perspective. In addition, the studies pertaining to developing economies and possible explanations for the failure of the Fisher effect are also reviewed.

Keywords: Fisher Effect; adaptive expectations; rational expectations (search for similar items in EconPapers)
JEL-codes: E40 E51 (search for similar items in EconPapers)
Pages: 25 pages.
Date: 2002-09
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