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| Yifei Cai |
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| ''Testing the Fisher Effect in the US'' |
| ( 2018, Vol. 38 No.2 ) |
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| To apply Quantile Unit Root test and Quantile Cointegration test, this paper revisits the classical Fisher hypothesis. Due to the lower power of conventional unit root tests and Engle-Granger cointegration test, these two newly proposed econometric models shed similar light from different angles. The Quantile Cointegration test indicates that the real interest rate is stationary, which is in line with Fisher Effects. Besides, the empirical results also show asymmetric performance in the mean-reverting process. Likewise, the Quantile Cointegration test reports full Fisher Effects in the upper quantiles, and Fisher puzzles in the lower quantiles by using nominal interest rate and inflation rate. These findings have meaningful economic implications for the US monetary policy authorities. Specifically, the monetary policy authority should pay attention to these asymmetries when making monetary policies, especially avoiding the negative effects of tight monetary policy on mild inflation. Besides, under the condition of hyperinflation, the interest rate would play a one to one role in curbing the irrational inflation. |
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| Keywords: Fisher Hypothesis, Quantile Unit Root Test, Quantile Cointegration Test, Asymmetric Properties |
JEL: C3 - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions
E4 - Money and Interest Rates: General |
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| Manuscript Received : Apr 20 2017 | | Manuscript Accepted : May 12 2018 |
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