A broader multicountry perspective on the Gibson paradox and fisher's hypothesis

Abstract

A broader multicountry perspective on the gibson paradox and fisher's hypothesis Correlations between nominal interest rates and price levels in 44 countries over periods of about 30 years indicate the Gibson paradox is widely observed in the post-Word War II era. Fisher's hypothesis on the determination of nominal interest rates, which has been regarded as one possible explanation for the phenomenon, is formulated in terms of Granger-causality between inflation and interest rates, and a test of causal ordering across the pair is conducted. The test results seem to provide only a limited degree of support for the hypothesis.