I thought this was interesting and humorous. It seems the origin of the saying is due to William Blake.

“Liar, liar, pants on fire. Hangin’ on a telephone wire!” is a paraphrased version of the 1810 poem “The Liar” by William Blake.

Deceiver, dissembler
Your trousers are alight
From what pole or gallows
Shall they dangle in the night?

When I asked of your career
Why did you have to kick my rear
With that stinking lie of thine
Proclaiming that you owned a mine?

When you asked to borrow my stallion
To visit a nearby-moored galleon
How could I ever know that you
Intended only to turn him into glue?

What red devil of mendacity
Grips your soul with such tenacity?
Will one you cruelly shower with lies
Put a pistol ball between your eyes?

What infernal serpent
Has lent you his forked tongue?
From what pit of foul deceit
Are all these whoppers sprung?

Deceiver, dissembler
Your trousers are alight
From what pole or gallows
Do they dangle in the night?

Evidently that origin merged with Pinocchio for the revised line -- "Liar, liar, pants on fire; your nose is longer than a telephone wire" -- from the Castaways' Liar, Liar.