The Fisher Equation: A Nonlinear Panel Data Approach |
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| Authors: | Dong-Hyeon Kim Joyce Hsieh Yu-Bo Suen |
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| Affiliation: | 1. Department of Food and Resource Economics, Korea University, Seoul, South Korea;2. Department of International Business, Tamkang University, New Taipei City, Taiwan;3. Department of Finance and Banking, Aletheia University, New Taipei City, Taiwan |
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| Abstract: | 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. |
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| Keywords: | Fisher effects panel smooth transition regression |
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