The Fisher Effect in an Emerging Economy: The Case of India

Sathye, Milind; Sharma, Dharmendra; Liu, Shuangzhe

doi:10.5539/ibr.v1n2p99

Cited by 9 publications

(9 citation statements)

References 15 publications

(10 reference statements)

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“…The results to a very great degree indicate that inflation has both short-run and association with interest rates. The findings are in line with past studies such as Panopoulou (2005), Gül and Ekinci (2006), Herwartz and Reimers (2006), Westerlund (2006), Ling et al (2008), Sathye, Sharma and Liu (2009), Mahdi and Masood (2011), Ayub et al (2014), Ida & Luguterah (2014), and Jaradat and AI-Hhosban (2014) works that reported of a stable association in a similar study. The findings of a significant long-term link between interest rates and inflation in the current empirical study support the Fisher effect (1930).…”

Section: Discussionsupporting

confidence: 92%

“…The research findings in the literature have not been consistent. The findings of these studies are reported in various researchers works (See Wilcox, 1983;Benhabib, Schmitt-Grohe & Uribe, 2002;Berument & Jelassi, 2002;Fahmy & Kandil, 2002;Panopoulou, 2005;Gül & Ekinci, 2006;Herwartz & Reimers, 2006;Westerlund, 2006;Sathye, Sharma, & Liu, 2009;Ayub, Rehman, Iqbal, Zaman, & Atif, 2014;Ida & Luguterah, 2014).…”

Section: Introductionsupporting

confidence: 58%

“…The findings provided support for the Fisher (1930) hypothesis. Sathye, Sharma and Liu (2009) investigated the rates of interest and inflation association for India. Their study findings indicated a statistically stable link between inflation and interest rate in the long-run which supports the Fisher hypothesis.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Modelling inflation-interest rate nexus for Ghana

Yeboah

2020

IJFAM

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Purpose: The research assesses the interest rates-inflation association in the case of Ghana between 2007 and 2013. Monthly and quarterly data were used. Research Methodology: The model of the vector error correction and Johansen were used to investigate the long-term and short-term association in the model estimated respectively. The vector autoregression (VAR) test was used to model the joint dynamics between the variables. GRETL software was used in these tests. Granger predictive test was done with the EViews software. Results: The findings of the result confirm both long-run and a short-run association in the model and as well as neutral granger predictive causality. Limitations: Though the Johansen test is more appropriate for multivariate modelling, Engle-Granger test is considered to be more robust in most cases and as such future studies should consider using the two models in a comparative study to assess whether the current conclusions can collaborate. Contribution: The paper contributes to knowledge in the field of inflation and Interest rates association, in relation to the financial markets. Future Research models that account for structural breaks and panel works are worth doing. Keywords: Fisher effect, Treasury bill rates long run, Johansen model

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Section: Discussionsupporting

confidence: 92%

Section: Introductionsupporting

confidence: 58%

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Modelling inflation-interest rate nexus for Ghana

Yeboah

2020

IJFAM

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“…Westerlund (2008) used panel cointegration for 20 OECD countries and found support for the Fisher effect between nominal short-term interest rates and inflation rates. Additionally, Sathye et al (2008) applied the Engle–Granger method for cointegration for India and confirmed the presence of the Fisher effect between inflation rates and yield rates on three-month treasury bills. Piccinino (2011) used cointegration analysis for some European Union member countries and found evidence of the Fisher effect between European interbank interest rates and expected inflation rates.…”

Section: Literature Reviewmentioning

confidence: 68%

Testing fisher effect for the USA: application of nonlinear ARDL model

Ongan¹,

Göçer

2019

JFEP

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Purpose This paper aims to investigate the presence of the Fisher effect for the USA from a new methodological perspective differing it from all previous studies using the common linear representation of the Fisher equation. Design/methodology/approach The nonlinear ARDL model, recently developed by Shin et al. (2014), is applied for the 10-year US Government bond rates over the period of 1985M1-2017M10. Findings The empirical findings indicate that the US Federal Reserve (FED) is a more predominant arbiter in the determination of interest rates during periods of declining inflation rates than periods of rising inflation rates. This finding may allow the FED to apply more proactive and prudent monetary policy. Additionally, this study newly describes and introduces a different version of the partial Fisher effect and extends the Fisher equation to some degree in terms of the partial Fisher effect. Originality/value To the best the authors’ knowledge, this method is applied for the first time in testing the Fisher effect for the USA.

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“…By using the data on nominal short-term interest rates and inflation rates, he found support for the Fisher effect across countries. Sathye, Sharma and Liu (2008) tested the Fisher effect in India using the Engle-Granger method for cointegration with monthly data from April 1996 till August 2004. By using the data of inflation rate and yield rates on three-month Treasury bills, they confirmed the presence of the Fisher effect in the Indian financial market.…”

Section: Literature Reviewmentioning

confidence: 99%

Testing the Fisher Effect in Croatia: An Empirical Investigation

Benazić¹

2013

Economic Research-Ekonomska Istraživanja

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In his celebrated book The Theory of Interest Irving Fisher asserted that a percentage increase in the expected rate of inflation would lead to a percentage increase in the nominal interest rates assuming that real interest rate is constant. The so-called Fisher effect suggests that changes in the nominal interest rate reflect the revised inflation expectations; and revised inflation expectations have an impact on the level of the nominal interest rate. Consequently, the monetary authorities should employ strategies that will prevent inflation from rising if nominal interest rates are to be kept at low levels in order to not discourage the borrowing. The aim of this paper is to empirically test the Fisher effect in Croatia using VEC (vector error correction) model. The results suggest that the "full" Fisher effect in Croatia may de facto hold only in the long-run. This paper is organized as follows. Section 2 after the introduction, reviews the literature. Section 3 reviews used data while Section 4 describes methodology, empirical analysis and the results. Finally, Section 5 provides some concluding remarks. ARTICLE INFO

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The Fisher Effect in an Emerging Economy: The Case of India

Cited by 9 publications

References 15 publications

Modelling inflation-interest rate nexus for Ghana

Modelling inflation-interest rate nexus for Ghana

Testing fisher effect for the USA: application of nonlinear ARDL model

Testing the Fisher Effect in Croatia: An Empirical Investigation

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