New Keynesian economics

Fisher hypothesis

Physics

Monetary policy

International Fisher effect

Macroeconomics

Econometrics

Real interest rate

Economics

Keynesian economics

Interest rate

Econometric model

Inflation (cosmology)

Inflation rate

Theoretical physics

Monetary economics

Nominal interest rate

American Economic Journal Macroeconomics

This paper assesses the presence and importance of the neo-Fisher effect in postwar data. It formulates and estimates an empirical and a New Keynesian model driven by stationary and nonstationary monetary and real shocks. In accordance with conventional wisdom, temporary increases in the nominal interest rate are estimated to cause decreases in inflation and output. The main finding of the paper is that permanent monetary shocks that increase the nominal interest rate and inflation in the long run cause increases in interest rates, inflation, and output in the short run and explain about 45 percent of inflation changes. (JEL E12, E23, E31, E43, E52)

The Neo-Fisher Effect: Econometric Evidence from Empirical and Optimizing Models