Article1997

The Fisher effect and Australian interest rates

32 citations0/0 files storedApplied Financial Economics

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Monetary Policy and Economic Impact Financial Markets and Investment Strategies Economic theories and models

Abstract

The Fisher hypothesis states that price inflation is fully reflected in nominal interest rates, implying that the underlying real rate is constant. This hypothesis is tested for Australian short and long-term interest rates using the Johansen methodology of cointegration testing, on both a pre- and post-tax basis. It is found that while the Fisher effect fails prior to the financial deregulation of the 1980s, there is evidence following deregulation that the relationship is restored.

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References

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2009An Empirical Investigation of The Fisher Effect in Nigeria: A Co-Integration and Error Correction Approach 2003Nonparametric cointegration analysis of the nominal interest rate and expected inflation rate

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