Rethinking the Fisher Effect: A Co-integration Analysis Between Interest Rates and Inflation (Reconsiderando o Efeito Fisher: Uma Analise de Cointegracao Entre Taxas de Juros e Inflacao)
Francisco Galrao Carneiro
The World Bank
Jose Angelo Divino
Catholic University of Brasilia
Carlos Henrique Rocha
Catholic University of Brazil
Nova Economia, Vol. 13, No. 1, pp. 81-100, January-June 2003
This paper investigates the validity of the Fisher effect hypothesis that it is the interest rate which moves to adjust to the anticipated changes in the rate of inflation. The analysis is carried out with monthly data for the period 1980-97 for three countries with recent histories of chronic high inflation: Argentina, Brazil, and Mexico. A co-integration analysis has 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.
Note: Downloadable document is in Portuguese.
Number of Pages in PDF File: 15
Keywords: Inflation, interest rate, monetary policy, Argentina, Brazil, Mexico
JEL Classification: O42, E31Accepted Paper Series
Date posted: January 16, 2004
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