Some Empirical Evidence on Models of Fisher Relation

Seoul Journal of Economics 2018, Vol. 31, No. 2

12 Pages Posted: 16 Jun 2018

See all articles by Jae-Young Kim

Jae-Young Kim

Seoul National University - Department of Economics

Woong Yong Park

Seoul National University

Date Written: May 30, 2018

Abstract

The Fisher relation, describing a one-for-one relation between nominal interest rate and expected inflation, underlies many important results in economics and finance. The Fisher relation is a conceptually simple relation, but the empirical evidence of it is more or less complicated with mixed results. Several alternative models with different implications were proposed in empirical literature for the Fisher relation. We evaluate these alternative models for the Fisher relation based on a post-data model determination method. Our result for data from the U.S. and Korea shows that models with both regimes/periods, a regime with non-stationary fluctuations and the other with stationary fluctuations, fit data best for the Fisher relation.

Keywords: Fisher relation, Nonlinear behavior, Post-data model

JEL Classification: C1, C22, C5

Suggested Citation

Kim, Jae-Young and Park, Woong Yong, Some Empirical Evidence on Models of Fisher Relation (May 30, 2018). Seoul Journal of Economics 2018, Vol. 31, No. 2 , Available at SSRN: https://ssrn.com/abstract=3187164

Jae-Young Kim (Contact Author)

Seoul National University - Department of Economics ( email )

San 56-1, Silim-dong, Kwanak-ku
Seoul 151-742
Korea

Woong Yong Park

Seoul National University ( email )

Kwanak-gu
Seoul, 151-742
Korea, Republic of (South Korea)

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