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The Fisher effect and Australian interest rates

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  • K. M. Hawtrey

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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File URL: http://www.tandfonline.com/doi/abs/10.1080/096031097333457
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 7 (1997)
Issue (Month): 4 ()
Pages: 337-346

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Handle: RePEc:taf:apfiec:v:7:y:1997:i:4:p:337-346

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Cited by:
  1. H.a. Mitchell-innes & M.j. Aziakpono & A.p. Faure, 2007. "Inflation Targeting And The Fisher Effect In South Africa: An Empirical Investigation," South African Journal of Economics, Economic Society of South Africa, vol. 75(4), pages 693-707, December.
  2. Maki, Daiki, 2003. "Nonparametric cointegration analysis of the nominal interest rate and expected inflation rate," Economics Letters, Elsevier, vol. 81(3), pages 349-354, December.
  3. Awomuse, Bernard O. & Alimi, Santos R., 2012. "The Relationship between Nominal Interest Rates and Inflation: New Evidence and Implication for Nigeria," MPRA Paper 49684, University Library of Munich, Germany.
  4. Lee, King Fuei, 2007. "An Empirical Study of the Fisher Effect and the Dynamic Relation Between Nominal Interest Rate and Inflation in Singapore," MPRA Paper 12383, University Library of Munich, Germany.
  5. Ostermark, Ralf, 2001. "Multivariate cointegration analysis of the Finnish-Japanese stock markets," European Journal of Operational Research, Elsevier, vol. 134(3), pages 498-507, November.
  6. Muse, Bernard & Alimi, R. Santos, 2012. "Testing an Augmented Fisher Hypothesis for a Small Open Economy: The Case of Nigeria," MPRA Paper 44987, University Library of Munich, Germany.

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