The aim of this research is to examine the existence of Fisher Effect for Indonesian Economy, by regressing interest rate on rate of inflation in period 1980-2011. With co-integration and error correction technique, the results indicate that an increases of one percent in inflation rate lead to increase in interest rate at 0,13 percent in short-run and at 0,95 percent in longrun. This research can’t confirm the existence of Fisher Effect in Indonesian Economy in
short-run, but this effect exists in long-run.
Keywords: Fisher Effect, Interest Rate, Inflation Rate, Co-integration, Error Correction Model
The aims of this research is to develop unequilibrium model relationship among interest rate,inflation, and foreign exchange rate in Indonesia using monthly data from January 2011 to April2015. The results of Augmented Dickey-Fuller test shows that the data of interest rate, inflation, andforeign exchange rate in this period is not stationary at level, but stationary in first difference.Johansen Cointegration test results indicate that the interest rate, inflation, and foreign exchange rateare cointegrated. Equilibrium model that used to determine the relationship among interest rate,inflation, and foreign exchange rate is Vector Error Correction models. The results of this studyindicate that interest rate affect on inflation and foreign exchange rate in Indonesia.Keyword: Interest Rate, Inflation, Exchange Rate,Vector Error Correction Model
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