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Testing the Fisher effect as a long-run equilibrium relation
- Source :
- Applied Financial Economics. 6:115-120
- Publication Year :
- 1996
- Publisher :
- Informa UK Limited, 1996.
-
Abstract
- The recent advances in the econometrics of integrated time series by Johansen are applied to the much examined Fisher effect. While the existing literature is concerned with whether there is a stable long-run equilibrium relation between the nominal rate of interest and inflation, the existence of a one-to-one relation along this path is also tested. Moreover, it is found that in the long run there is a unidirectional causality from the inflation rate to the rate of interest. However, in the short-run there is a feedback (bi-directional causality) between the two variables.
Details
- ISSN :
- 14664305 and 09603107
- Volume :
- 6
- Database :
- OpenAIRE
- Journal :
- Applied Financial Economics
- Accession number :
- edsair.doi...........b5abb5f46f8eaedece5e795a1e4000b9