The long-run Fisher effect in developing economies
Purpose – The purpose of this study is to test the validity of Fisher effect for four South Asian and two oil-producing countries, namely India, Bangladesh, Pakistan, Sri Lanka, Kuwait and Saudi Arabia. Design/methodology/approach – The autoregressive distributed lag-bound testing approach is used which is capable of testing the long-run relationship irrespective of whether the underlying series are individually I(0) or I(1). Findings – The estimation results indicate the presence of weak form of Fisher effect in India, Pakistan, Kuwait and Saudi Arabia, while the hypothesis of the existence of Fisher effect is not supported for Bangladesh and mixed results are found for Sri Lanka. Practical implications – The results help monetary authorities to formulate better monetary policy, besides many other far reaching macroeconomic implications for each economy. Originality/value – The use of a variety of interest rates and the use of a relatively new technique in Fisher effect is tested in developing economies.
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Volume (Year): 27 (2010)
Issue (Month): 4 (October)
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References listed on IDEAS
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- Koustas, Zisimos & Serletis, Apostolos, 1999.
"On the Fisher effect,"
Journal of Monetary Economics,
Elsevier, vol. 44(1), pages 105-130, August.
- Bardsen, Gunnar, 1989. "Estimation of Long Run Coefficients in Error Correction Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(3), pages 345-50, August.
- Atkins, Frank J. & Coe, Patrick J., 2002. "An ARDL bounds test of the long-run Fisher effect in the United States and Canada," Journal of Macroeconomics, Elsevier, vol. 24(2), pages 255-266, June.
- James B. Bullard, 1999. "Testing long-run monetary neutrality propositions: lessons from the recent research," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 57-77.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- William J. Crowder, 1997. "The Long-Run Fisher Relation in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1124-42, November.
- Arusha Cooray, 2002. "The Fisher Effect: A Review of the Literature," Research Papers 0206, Macquarie University, Department of Economics.
- repec:clg:wpaper:1998-09 is not listed on IDEAS
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