The Fisher Effect (FE) is of fundamental importance in financial markets. The majority of previous studies have not managed to obtain the expected one-for-one reaction of the nominal interest rate to the inflation rate. The aim of this article is to reinvestigate the FE for the USA and the UK using a case-wise bootstrap approach developed by Hatemi-J and Hacker (2005). This method is robust to nonnormality or heteroscedasticity and it is used to calculate and test the statistical significance of the coefficients. The results support a tax-adjusted FE in the presence of a structural break.
Subject classification (UKÄ)
- Probability Theory and Statistics