The Fisher Puzzle, Real Rate Anomaly, and Wicksell Effect

58 Pages Posted: 27 Dec 2017 Last revised: 22 Mar 2019

See all articles by Ali Anari

Ali Anari

Texas A&M University - Mays Business School

James W. Kolari

Texas A&M University - Department of Finance

Date Written: July 3, 2018

Abstract

We study the relationships between interest and inflation rates using a recursive equation approach that takes into account both Fisher and Wicksell effects. Extending previous work, a state space representation is used to estimate time-varying ex post Fisher and Wicksell equation effects. We subsequently recover ex ante interest and inflation rate series. Using these ex ante rate series, we estimate an ex ante Fisher equation, including both time-varying intercept estimates of the ex ante real interest rates and time-varying Fisher coefficients. Our results for the U.S. and three other countries support the Fisher propositions after taking into account Wicksell effects.

Keywords: Inflation, Interest Rates, Fisher And Wicksell Coefficients, Real Interest Rates

JEL Classification: C30, E40, E43

Suggested Citation

Anari, Ali and Kolari, James W., The Fisher Puzzle, Real Rate Anomaly, and Wicksell Effect (July 3, 2018). Mays Business School Research Paper No. 3092298. Available at SSRN: https://ssrn.com/abstract=3092298 or http://dx.doi.org/10.2139/ssrn.3092298

Ali Anari

Texas A&M University - Mays Business School ( email )

Wehner 401Q, MS 4353
College Station, TX 77843-4218
United States
979-845-2094 (Phone)
979-845-0460 (Fax)

James W. Kolari (Contact Author)

Texas A&M University - Department of Finance ( email )

MS-4218
Department of Finance
College Station, TX TX 77843-4218
United States
979-845-4803 (Phone)
979-845-3884 (Fax)

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