On The Fisher Effect And Inflation Dynamics In Low-Income Countries: An Assessment Of Sub-Saharan Africa Economies
AbstractControlling for structural breaks, this study examines whether the relationship between the interest rate and inflation exhibits common stochastic trends in a sample of Sub-Saharan Africa (SSA) economies. The results indicate that while the Fisher effect does not hold for the entire sample period, 1980:I-2005:II nor in pre-economic reforms period, this relationship holds for the post-economic reforms (deregulated financial markets and exchange rate float regime) period, 1995:I-2005:II. Further, from the vector error-correction model (VECM), we find a less than proportionate response of short-term adjustment of the nominal interest rate to expected inflation. This implies that, compared to the long-term, in the short-term the nominal interest rate are poor predictors of inflation and the monetary policy in these countries is unlikely to impact on ex ante real interest rates in the long-term.
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Bibliographic InfoArticle provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.
Volume (Year): 6 (2006)
Issue (Month): 1 ()
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Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
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