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Alternative Specifications of Fisher Hypothesis: An Empirical Investigation

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  • S, Surayya

Abstract

Fisher hypothesis provides theoretical framework for the study of relationship between nominal interest rate and inflation. It assumes one to one direct relationship between nominal interest rate and inflation. Modifications to this model are explained by Mundell effect, Phillips curve and Friedman effect , Levi and Makin effect, Darby effect and Carmichael and Stebbing effect (Inverted Fisher Hypothesis). The objective of this paper is to explore the Fisher hypothesis and its alternative specifications using IFS Panel data set and applying General to Specific Methodology .Findings of this paper show that Inverted Fisher hypothesis holds in above average money supply ̷ GDP countries. Full Fisher effect is present only when Phillips curve effect and Friedman effect are also present in below average money supply ̷ GDP countries.

Suggested Citation

  • S, Surayya, 2018. "Alternative Specifications of Fisher Hypothesis: An Empirical Investigation," MPRA Paper 90320, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:90320
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    More about this item

    Keywords

    Fisher Hypothesis; Interest Rate; Inflation; Panel Data; General to Specific Model.;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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