This article reinvestigates the Fisher equation. Using the panel smooth transition regression (PSTR) model, it was found that there is a significant regime-switching effect concerning the impact of inflation on interest rates. Specifically, inflation is found to raise the interest rates and the effect becomes stronger in magnitude with inflation. However, the data do not provide evidence in support of the one-for-one Fisher effect. The evidence is robust to interest rates with different maturities and subsamples.
|Number of pages||19|
|Journal||Emerging Markets Finance and Trade|
|Publication status||Published - 2018 Jan 2|
- Fisher effects
- panel smooth transition regression
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)