Real Interest Parity and the Fisher Hypothesis: The Empirical Evidence
Studies involving inflation expectation mechanisms other than rational expectations are generally based on a regression equation normalising on the nominal interest rate. Moreover, most of these studies have focused on testing the constancy of the real interest rate within the United States. Gibson (1972) tested the validity of the FH for Treasury bills of varying maturities over two periods (1952–70 and 1959–70) using the Livingston survey data on price expectations and obtained results which lent support to the hypothesis that the real interest rate is not affected by price expectations and that the nominal interest rate fully adjusts to inflationary expectations.
KeywordsEurope Covariance Income Autocorrelation OECD
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