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A Test of Neo-Fisherism: 1964-2019

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dc.contributor.author Bias, Peter V.
dc.contributor.author Hall, Joshua D.
dc.date.accessioned 2022-06-20T19:56:53Z
dc.date.available 2022-06-20T19:56:53Z
dc.date.issued 2021-01-01
dc.identifier.citation Bias, P. V., & Hall, J. D. (2021). A Test of Neo-Fisherism: 1964-2019. B. E. Journal of Macroeconomics, 21(1), 221-251. https://doi.org/10.1515/bejm-2017-0234 en_US
dc.identifier.other https://doi.org/10.1515/bejm-2017-0234
dc.identifier.uri http://hdl.handle.net/11416/640
dc.description.abstract Neo-Fisherism, the theory that monetary authorities should expect inflation rates to be positively and causally related to their targeted nominal interest rates, is reviewed and empirically investigated. Using several different measures of interest rates and inflation we analyze US monthly data from January 1964 to April 2019. Granger causality tests are performed in search of a Neo-Fisherist impact of interest rates causally impacting inflation or the reverse. The full period is reviewed and is also divided into three sub-periods: the period before the Federal Reserve targeted federal funds rate at 25 basis points (labeled here as the effective lower bound, ELB), the ELB period, and the post-ELB period. Prior to the effective lower bound, we find evidence largely supporting the classical view of causality from inflation to interest rates, however the relationship is bidirectional depending on the measurement of inflation and interest rates. During the ELB, we find moderate evidence in support of Neo-Fisherism. In this period, federal funds rate Granger-cause changes in inflation as measured using the CPI and Core CPI. In contrast, during the effective lower bound period, the standard classical result holds when considering the Shadow federal funds rate. In the period following the effective lower bound, the standard relationship is found as well, in which inflation granger causes movements in the interest rates. Overall, the results regarding causality between interest rates and inflation largely support the classical view of causality but are dependent on data measurements and the observed time period. en_US
dc.language.iso en_US en_US
dc.publisher De Gruyter en_US
dc.subject Neo-Fisherism en_US
dc.subject Monetary policy en_US
dc.subject Interest rates—Effect of inflation on en_US
dc.title A Test of Neo-Fisherism: 1964-2019 en_US
dc.type Other en_US

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