The methodology for assessing interest-rate policy rules: a reply

2021 ◽  
Vol 18 (3) ◽  
pp. 286-292
Author(s):  
John Smithin
Keyword(s):  
Interest Rate ◽  
Policy Rules ◽  
Interest Rate Policy ◽  
Zero Interest Rate Policy ◽  
Rate Policy ◽  
Conceptual Foundations ◽  
The Impact

This note is a brief reply to Watts (2021), who has been critical of the conceptual foundations and methodology in a discussion of the impact of different interest rate policy rules on inflation in Smithin (2020). The reply concludes that the case for a ‘zero real policy rate of interest’ (ZRPR), rather than a ‘zero interest rate policy’ (ZIRP), emerges unscathed.

The methodology for assessing interest-rate policy rules: some comments

2021 ◽  
Vol 18 (3) ◽  
pp. 275-285
Author(s):  
Martin Watts
Keyword(s):  
Interest Rate ◽  
Interest Rate Rules ◽  
Policy Rules ◽  
Interest Rate Policy ◽  
Modelling Framework ◽  
Rate Policy ◽  
Macroeconomic Impacts ◽  
Conceptual Foundations ◽  
The Impact

This paper is critical of the conceptual foundations and methodology adopted by Smithin (2020) in his exploration of the impact of different interest-rate policy rules on inflation. His modelling framework is too narrow to adequately discriminate between different interest-rate rules in terms of their broader macroeconomic impacts.

scholarly journals Non-Linear Analysis of the Fisher Effect: In the Case of Japan

2017 ◽  
Vol 9 (11) ◽  
pp. 1
Author(s):  
Katsuhiro Sugita
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Error Correction ◽  
Fisher Effect ◽  
Interest Rate Policy ◽  
Vector Error Correction ◽  
Long Run ◽  
Nominal Interest Rates ◽  
Zero Interest Rate Policy ◽  
Rate Policy

The Fisher effect has been commonly analyzed to investigate the long-run relationship between nominal interest rates and expected inflation rate, though it is rarely successful in finding the cointegration relationship as the Fisher effect states. In this paper, a Bayesian Markov switching vector error correction model is applied to analyze non-linearity in the Fisher effect in the case of Japan. We find that the Fisher effect holds in one regime although it does not hold in another regime when the nominal interest rate is stable and does not respond against disequilibrium by the monetary policy such as the zero interest rate policy. This model reveals non-linearity in the error correction mechanism of the Fisher effect in Japan.

Sign in / Sign up

Export Citation Format

Share Document