Revisiting the Fisher Effect Hypothesis for the Cases of Argentina, Brazil and Mexico
Francisco Galrao Carneiro
The World Bank
Jose Angelo Divino
Catholic University of Brasilia
Carlos Henrique Rocha
Catholic University of Brazil
Forthcoming in Applied Economics Letters
This paper investigates the validity of the Fisher effect hypothesis that it is the interest rate that moves to adjust to anticipated changes in the rate of inflation. The analysis is carried out with monthly data for the period 1980-97 for three countries that have a recent history of chronic high inflation: Argentina, Brazil and Mexico. A cointegration analysis provided evidence of a stable long-run equilibrium relationship between nominal interest rates and the inflation rate for the cases of Argentina and Brazil only.
Keywords: inflation, interest rates, monetary policy, cointegration analysis
JEL Classification: O42, E31Accepted Paper Series
Date posted: November 23, 2001
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