Expected inflation and interest rates : Some cross-country evidence

Abstract

This paper presents an empirical investigation of the relation between expected inflation and nominal interest rates. In particular, the focus is on whether inclusion of some omitted macro variables in creases the performance of the standard Fisher equation. The results with international cross-country data from 8 OECD countries covering the period 1953-1982 indicate that the Fisher equation does not represent a proper starting point for empirical analysis of interest rates.