Comments on 'Econometric Analysis of Fisher's Equation' by Peter C. B. Phillips

摘要

I am honored to discuss Peter Phillips's fascinating contribution to this volume, although my remarks are tempered by the fact that this is not my area of expertise. Ostensibly this paper is an empirical analysis of the Fisher equation; however, I view its primary contribution as providing important new econometric tools for analyzing nonsta-tionary time series. After summarizing its key theoretical contributions for the benefit of readers who are less familiar with continuous time stochastic processes, I offer my assessment of whether this elegant asymptotic approach yields new empirical insights into the Fisher equation. Overall, I think the paper leaves us with some important unresolved puzzles about the joint evolution of the nominal interest rate, the inflation rate, and the (ex post) real rate of interest. More heretically, I question whether the simple version of the Fisher equation provides a useful framework for thinking about the behav- ior of nominal interest rates, especially since the simplest versions of this equation ignore the trementdous advances in finance in the years since Fisher's death.