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The Fisher effect on long-term U.K. interest rates in alternative monetary regimes: 1844-2018

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  • Hakan Berument
  • Richard T. Froyen

Abstract

The Fisher Effect is one of the most widely studied relationships in monetary economics. Previous studies have found little evidence of a Fisher effect in pre-World War I data for the United Kingdom. An explanation for this is the near white noise property of the inflation rate under the Classical Gold Standard. There is more evidence of a Fisher effect in the post-World War II years when the inflation rate showed more persistence. This paper studies the evidence on the Fisher effect over the time period 1844-2018. This period covers several distinct monetary regimes. The monetary regime is an important factor determining the time series behavior of the inflation rate which, in turn, has been shown to be crucial to the strength of the Fisher effect. Distinctive features of the study are the focus on the long-term interest rate and coverage of the current inflation targeting regime in the United Kingdom.

Suggested Citation

  • Hakan Berument & Richard T. Froyen, 2021. "The Fisher effect on long-term U.K. interest rates in alternative monetary regimes: 1844-2018," Applied Economics, Taylor & Francis Journals, vol. 53(33), pages 3795-3809, July.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:33:p:3795-3809
    DOI: 10.1080/00036846.2021.1886239
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    Cited by:

    1. Basse, Tobias & Wegener, Christoph, 2022. "Inflation expectations: Australian consumer survey data versus the bond market," Journal of Economic Behavior & Organization, Elsevier, vol. 203(C), pages 416-430.
    2. William P. Fisher Jr., 2023. "Separation Theorems in Econometrics and Psychometrics: Rasch, Frisch, Two Fishers and Implications for Measurement," Journal of Interdisciplinary Economics, , vol. 35(1), pages 29-60, January.
    3. Andrew Phiri, 2023. "Fisher’s hypothesis in time–frequency space: a premier using South Africa as a case study," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(5), pages 4255-4284, October.

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