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Financial Liberalization in ASEAN and the Fisher Hypothesis

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  • Law, Siong Hook

    (Fakulti Ekonomi dan Pengurusan Universiti PUlTa Malaysia 43400 UPM Serdang Selangor Danl! Ehsan Malaysia)

  • Tan, Hui
  • baharumshah, ahmad

    (Fakulti Ekonomi dan Pengurusan Universiti PUlTa Malaysia 43400 UPM Serdang Selangor Danl! Ehsan Malaysia)

Abstract

This study examines the long-run relationship between inflation and nominal interest rates in the 1990s by utilizing the Johansen-Juselius multivariate cointegration technique. The evidence supports the tax adjusted form of Fisher hypothesis for three ASEAN countries, namely Singapore. Malaysia and Thailand. Thus, the assumption of a stable real imerest rate appears to have empirical support for these low-inflation economies. We also demonstrate that inflation rate is both weakly and strongly exogenous in these three systems. However, the weak form of the hypothesis is decisively rejected for the inflation prone countries like the Philippines and Indonesia. In general, Our results suggest that in a deregulated environments real interest rate is insulated from nominal shocks and money is neutral.

Suggested Citation

  • Law, Siong Hook & Tan, Hui & baharumshah, ahmad, 1999. "Financial Liberalization in ASEAN and the Fisher Hypothesis," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 33, pages 65-86.
    • Handle: RePEc:ukm:jlekon:v:33:y:1999:i::p:65-86
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    References listed on IDEAS

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