THE FISHER EFFECT - REPRISE

A nonstationary ex ante real interest rate implies that the Fisher eff ect should be recast as a long-run equilibrium relationship between th e expected inflation component of the nominal interest rate and actual inflation. The paper tests for cointegration between the quaterly inf lation rate and the expectation of inflation extracted from the three- months Treasury bill rate. The test results indicate that these variab les were cointegral during the sample period 1959:i-1993:iv.