An Empirical Examination of the Fisher Effect in Australia

Frederic Mishkin and John Simon

No 5080, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper analyzes the Fisher effect in Australia. Initial testing indicates that both interest rates and inflation contain unit roots. Furthermore, there are indications that the variables have non-standard error processes. To overcome problems associated with this and derive the correct small sample distributions of test statistics we make use of Monte Carlo simulations. These tests indicate that while a long-run Fisher effect seems to exist there is no evidence of a short-run Fisher effect. This suggests that, while short-run changes in interest rates reflect changes in monetary policy, longer-run levels indicate inflationary expectations. Thus, the longer-run level of interest rates should not be used to characterize the stance of monetary policy.

JEL-codes: E4 G0 (search for similar items in EconPapers)
Date: 1995-04
Note: EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

Published as Economic Record, 71, September1995, pp.227-239.

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Related works:
Journal Article: An Empirical Examination of the Fisher Effect in Australia (1995)
Working Paper: An Empirical Examination of the Fisher Effect in Australia (1994)
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