We investigate the empirical validity of the long-run Fisher effect using a technique capable of testing for the existence of a long-run relationship regardless of whether the underlying time series are individually I(1) or I(0). Using a variety of interest rates for the United States and Canada...

The basic puzzle about the so-called Fisher effect, in which movements in short-term interest rates primarily reflect fluctuations in expected inflation, is why a strong Fisher effect occurs only for certain periods but not for others. This paper resolves this puzzle by reexamining the...