Book contents
- The Behavioral Economics of Inflation Expectations
- The Behavioral Economics of Inflation Expectations
- Copyright page
- Dedication
- Contents
- Figures
- Tables
- Preface
- 1 Patterns and Expectations
- 2 Extrapolation and Expectations
- 3 Eliciting Expectations under Laboratory Conditions
- 4 Features of the Laboratory Data
- 5 Similarity Matching and Scaling the Experimental Data
- 6 Pattern Extrapolation and Expectations Measured by Consumer Surveys
- 7 Heterogeneity and Uncertainty of Inflation Expectations
- 8 Inflation Dynamics
- 9 Explaining the Course of Interest Rates
- 10 Generalizing the Pattern-Based Approach
- 11 A Detour to Income Expectations
- 12 The Fisher Effect in Historical Times
- 13 Expectations of High Inflation
- 14 The Fisher Effect in Asian Economies
- 15 The Fisher Effect in African Economies
- 16 Estimates of Expected Inflation for Major Economies
- 17 Estimates of Expected Real Interest Rates for Major Economies
- Epilogue
- References
- Index
12 - The Fisher Effect in Historical Times
Published online by Cambridge University Press: 24 July 2020
- The Behavioral Economics of Inflation Expectations
- The Behavioral Economics of Inflation Expectations
- Copyright page
- Dedication
- Contents
- Figures
- Tables
- Preface
- 1 Patterns and Expectations
- 2 Extrapolation and Expectations
- 3 Eliciting Expectations under Laboratory Conditions
- 4 Features of the Laboratory Data
- 5 Similarity Matching and Scaling the Experimental Data
- 6 Pattern Extrapolation and Expectations Measured by Consumer Surveys
- 7 Heterogeneity and Uncertainty of Inflation Expectations
- 8 Inflation Dynamics
- 9 Explaining the Course of Interest Rates
- 10 Generalizing the Pattern-Based Approach
- 11 A Detour to Income Expectations
- 12 The Fisher Effect in Historical Times
- 13 Expectations of High Inflation
- 14 The Fisher Effect in Asian Economies
- 15 The Fisher Effect in African Economies
- 16 Estimates of Expected Inflation for Major Economies
- 17 Estimates of Expected Real Interest Rates for Major Economies
- Epilogue
- References
- Index
Summary
The Fisher effect, that is, the theoretical prediction that nominal interest rates should adjust to changes in inflation expectations has been the subject of a variety of empirical studies. Chapter 9 has already presented evidence on this hypothesis with newer data. Interestingly, this theoretical proposition has not fared well for the historical data that Fisher (1930) himself studied. Irving Fisher found for the USA that the adjustment of interest rates takes about 20 years and even then is only partial. Furthermore, nominal interest rates for various countries, according to Fisher, do not adjust one-to-one to changes in inflation as witnessed by the fact that real rates of interest are lower in times of high inflation than in times of low inflation. Researchers after Fisher have largely confirmed this finding.1 A particularly interesting historical episode – from 1869 to 1913, under the gold standard – even suggests an outright contradiction of the Fisher hypothesis as we will explain. It is to these intriguing findings that this chapter turns.
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- Information
- The Behavioral Economics of Inflation ExpectationsMacroeconomics Meets Psychology, pp. 143 - 156Publisher: Cambridge University PressPrint publication year: 2020