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Some Empirical Evidence on Models of the Fisher Relation: Post-Data Comparison

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  • KIM, Jae-Young
  • PARK, Woong Yong

Abstract

The Fisher relation, describing a one-for-one relation between the nominal interest rate and the expected inflation, underlies many important results in economics and finance. Although it is a conceptually simple relation, the Fisher relation has more or less complicated with mixed results. There are several alternative models proposed in the empirical literature for the Fisher relation that have different implications. We evaluate those alternative models for the Fisher relation based on a post-data model determination method. Our results for data from the U.S. Japan and Korea show that models with both regimes/periods, a regime with nonstationary fluctuations and the other with stationary fluctuations, fit data best for the Fisher relation.

Suggested Citation

  • KIM, Jae-Young & PARK, Woong Yong, 2018. "Some Empirical Evidence on Models of the Fisher Relation: Post-Data Comparison," Discussion paper series HIAS-E-68, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    • Handle: RePEc:hit:hiasdp:hias-e-68
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Fisher relation; nonlinear behavior; post-data model determination;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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