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The Gibson Paradox and the Fisher Effect in Advanced and Emerging Economies

Author

Listed:
  • M. M. Islam Chowdhury

    (University of Calgary)

  • Apostolos Serletis

    (University of Calgary)

Abstract

This paper investigates the long-debated economic relationship between prices and interest rates through two macroeconomic relationships, the Gibson paradox and the Fisher effect. We use recent advances in applied econometrics and quarterly frequency data for the G7 (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) and E7 (Brazil, China, India, Indonesia, Mexico, Russia, and Turkey) countries. We also use the Schmelzing (2019) new data on advanced economy inflation rates and interest rates to investigate the Fisherian link in eight advanced economies (France, Germany, Holland, Italy, Japan, Spain, the United Kingdom, and the United States) across eight centuries. The overall conclusion of the paper demonstrates poor evidence of the Gibson paradox and the Fisher effect across developed and emerging economies.

Suggested Citation

  • M. M. Islam Chowdhury & Apostolos Serletis, 2024. "The Gibson Paradox and the Fisher Effect in Advanced and Emerging Economies," Open Economies Review, Springer, vol. 35(5), pages 955-983, November.
    • Handle: RePEc:kap:openec:v:35:y:2024:i:5:d:10.1007_s11079-023-09746-1
    DOI: 10.1007/s11079-023-09746-1
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    References listed on IDEAS

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    More about this item

    Keywords

    Gibson paradox; Fisher equation; Cointegration; G7; E7;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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