Testing fisher effect for the USA: application of nonlinear ARDL model
Journal of Financial Economic Policy
ISSN: 1757-6385
Article publication date: 9 December 2019
Issue publication date: 20 April 2020
Abstract
Purpose
This paper aims to investigate the presence of the Fisher effect for the USA from a new methodological perspective differing it from all previous studies using the common linear representation of the Fisher equation.
Design/methodology/approach
The nonlinear ARDL model, recently developed by Shin et al. (2014), is applied for the 10-year US Government bond rates over the period of 1985M1-2017M10.
Findings
The empirical findings indicate that the US Federal Reserve (FED) is a more predominant arbiter in the determination of interest rates during periods of declining inflation rates than periods of rising inflation rates. This finding may allow the FED to apply more proactive and prudent monetary policy. Additionally, this study newly describes and introduces a different version of the partial Fisher effect and extends the Fisher equation to some degree in terms of the partial Fisher effect.
Originality/value
To the best the authors’ knowledge, this method is applied for the first time in testing the Fisher effect for the USA.
Keywords
Citation
Ongan, S. and Gocer, I. (2020), "Testing fisher effect for the USA: application of nonlinear ARDL model", Journal of Financial Economic Policy, Vol. 12 No. 2, pp. 293-304. https://doi.org/10.1108/JFEP-09-2018-0127
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited