INTEREST-RATES AND INFLATIONARY EXPECTATIONS - LONG-RUN EQUILIBRIUM AND SHORT-RUN ADJUSTMENT

The relationship between inflation and the rate of interest for the United States is examined within a dynamic specification framework which yields direct estimates of the long-run as distinct from the short-run coefficients. The Fisher hypothesis as a long-run proposition is supported by the data. The results are shown to be robust with respect to the choice of the interest rate. © 1990.