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Neo-Fisherism and inflation control

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  • Stephen Williamson

Abstract

According to conventional central banking wisdom, an inflation-targeting central bank should increase (decrease) its nominal interest rate target when inflation is above (below) its target. According to neo-Fisherites, conventional central bankers have the sign wrong. Essentially all mainstream macroeconomic models tell us that increases in nominal interest rates increase inflationin the short run and in the long run. This paper reviews neo-Fisherian theory and evidence and addresses issues relating to inflation control in low real interest rate environments.

Suggested Citation

  • Stephen Williamson, 2019. "Neo-Fisherism and inflation control," Canadian Journal of Economics, Canadian Economics Association, vol. 52(3), pages 882-913, August.
    • Handle: RePEc:cje:issued:v:52:y:2019:i:3:p:882-913
    DOI: 10.1111/caje.12403
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    Cited by:

    1. Airaudo, Marco & Hajdini, Ina, 2023. "Wealth effects, price markups, and the neo-Fisherian hypothesis," European Economic Review, Elsevier, vol. 157(C).
    2. Marco Bassetto & Thomas J. Sargent, 2020. "Shotgun Wedding: Fiscal and Monetary Policy," Annual Review of Economics, Annual Reviews, vol. 12(1), pages 659-690, August.
    3. Ida, Daisuke, 2024. "Household heterogeneity and the price puzzle in a new Keynesian model," Journal of Macroeconomics, Elsevier, vol. 79(C).
    4. Ida, Daisuke, 2024. "The neo-Fisherian effect in a new Keynesian model with real money balances," MPRA Paper 120575, University Library of Munich, Germany.

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    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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