The neo-Fisherians are back!

Has neo-Fisherite policy worked in the US?

So, that’s a nice neo-Fisherian picture. If good labor market performance produces high inflation, why is inflation so much lower in Japan and Switzerland than in Canada? If unconventional monetary policies make inflation go up, why are the countries with the most extreme unconventional policies (negative nominal interest rates, quantitative easing) – Japan, Switzerland, and the Euro area – the ones with the lowest inflation in the picture? Canada, which didn’t indulge in any unconventional policies, but has a higher short-term nominal interest rate than all these countries but the US, has an inflation rate of 2.3%. How come? Neo-Fisherite policy works, that’s why.

Neo Fisherism: Look, it Works!
By: Stephen Wlliamson – University of Western Ontario

Martín Uribe estimates a SVAR model on postwar quarterly data from the United States and Japan and finds that in response to a permanent increase in the nominal interest rate, the one-to-one adjustment in the inflation rate predicted by the Fisher effect happens in less than a year. Inflation rises faster than the nominal interest rate and as a result the permanent increase does not generate a loss of aggregate output.
The Neo-Fisher Effect in the United States and Japan
Author: Martín Uribe
From: Columbia University

Is there a way to test a neo-Fisherian policy in Japan?
A neo-Fisherian experiment that hedges its New Keynesian bets
By: Tony Yates – University of Birmingham

The neo-Fisherian view: a matter of equlibrium selection

Gerke and Hauzenberger using a prototypical new-Keynesian model find:

First, with a temporarily pegged nominal rate during a liquidity trap (given an otherwise standard Taylor rule) the model generally produces multiple equilibrium paths: some of these paths are consistent with the neo-Fisherian view, others are not. Second, the unique optimal monetary policy at the lower bound on interest rates, which can be implemented in the model with interest rate rules and state-contingent forward guidance, does not result in a paradox. Third, if the assumption of perfect foresight or rational expectations is relaxed, the model produces an equilibrium that is not consistent with the neoFisherian view.

The Fisher paradox: A primer
Authors: Rafael Gerke, Klemens Hauzenberger
From: Deutsche Bundesbank