This article reinvestigates the Fisher equation. Using the panel smooth transition regression (PSTR) model, it was found that there is a significant regime-switching effect concerning the impact of inflation on interest rates. Specifically, inflation is found to raise the interest rates and the effect becomes stronger in magnitude with inflation. However, the data do not provide evidence in support of the one-for-one Fisher effect. The evidence is robust to interest rates with different maturities and subsamples.
Bibliographical noteFunding Information:
Yu-Bo Suen gratefully acknowledges the financial support of Taiwan’s National Science Council through grant NSC102-2410-H-156-004.
Copyright © Taylor & Francis Group, LLC.
- Fisher effects
- panel smooth transition regression
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)