Empirical Testing of International Fisher Effect in United States and Selected Asian Economies
|
| Title | Empirical Testing of International Fisher Effect in United States and Selected Asian Economies |
| Authors | |
| Abstract | Abstract: The relationship between the nominal interest rates and the expected inflation is of crucial importance in financial markets. The Fisher effect postulated that real interest rate is constant and that nominal interest rate and expected inflation move one-for-one together. The paper examines the existence of International fisher effect for United States and selected Asian countries like-India,Korea and Japan, by regressing interest rates differential on inflation rate differential during the period ,2001:Q1 to2012:Q2. The estimated slope coefficients in regressions of nominal interest rates differential on expected inflation rates differential are significantly different than the theoretical value of unity as is evident in our study. The finding lends support to the existence of partial fisher effect in USA because both interest rates and inflation rate move in positive direction but do not move with one-for-one. But in case of India, Japan and Korea, there do not exist any signs of International Fisher Effect. When each country is treated interchangeably as home country and foreign country to show the direction of International fisher Effect, the result shows mixed picture. The theory holds when some countries were used as home country but was disproved when they were used as foreign countries. In a nut shell, the study suggests that it finds evidence of a positive long run relationship between interest rate and inflation rate for the countries undertaken in our study but the notion of a full International Fisher Effect is rejected. |
| Publisher | World Science Publisher |
| Date | 2012-08-27 |
| Source | 2167-6372 |
| Rights | Copyright NoticeProposed Creative Commons Copyright Notices1. Proposed Policy for Journals That Offer Open AccessAuthors who publish with this journal agree to the following terms:Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work´s authorship and initial publication in this journal.Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal´s published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).Proposed Policy for Journals That Offer Delayed Open AccessAuthors who publish with this journal agree to the following terms:Authors retain copyright and grant the journal right of first publication, with the work [SPECIFY PERIOD OF TIME] after publication simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work´s authorship and initial publication in this journal.Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal´s published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access). |