Is the Fisher effect Asymmetric? Cointegration Analysis and Expectations Measurement

David O. Cushman, Glauco De Vita, Emmanouil Trachanas

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)


Using U.S. post-war data, we investigate whether the interest rate response to inflation known as the Fisher effect could be asymmetric. The asymmetry considered is that the long-run change in the interest rate is larger when inflation rises than when it falls. The possibility follows from behavioural hypotheses about the relationship of inflation expectations to actual inflation. Using an asymmetric cointegration approach, we find asymmetric cointegration in the Fisher effect for the post-war period through 1979, but not subsequently. We then find that starting in 1980, a breakdown developed in the relationship between inflation expectations from surveys and actual recent inflation rates, a breakdown not accounted for by asymmetry. If the survey results approximate true expectations, then econometric testing using actual recent inflation to compute expected inflation will suffer from mismeasurement, which could explain the finding of no cointegrating Fisher effect post-1979. The paper accounts for breakpoints and uses bootstrapping to conservatively estimate statistical significance.

Original languageEnglish
Pages (from-to)3727-3748
Number of pages22
JournalInternational Journal of Finance and Economics
Issue number4
Early online date12 Apr 2022
Publication statusPublished - Oct 2023

Bibliographical note

This is the peer reviewed version of the following article: Cushman, DO, De Vita, G & Trachanas, E 2023, 'Is the Fisher effect Asymmetric? Cointegration Analysis and Expectations Measurement', International Journal of Finance and Economics, vol. 28, no. 4, pp. 3727-3748., which has been published in final form at This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.

This document is the author’s post-print version, incorporating any revisions agreed during the peer-review process. Some differences between the published version and this version may remain and you are advised to consult the published version if you wish to cite from it.


  • Asymmetric cointegration
  • bootstrapping
  • Fisher effect
  • inflation expectations


Dive into the research topics of 'Is the Fisher effect Asymmetric? Cointegration Analysis and Expectations Measurement'. Together they form a unique fingerprint.

Cite this