Empirical Evidence of International Fisher Effect in Bangladesh with India and China

Alam, M.M., Alam, K.A., and Shuvo, A. 2011. An Empirical Evidence of International Fisher Effect in Bangladesh with India and China: A Time-Series Approach. Elixir Finance Management, 36: 3078-3081

9 Pages Posted: 31 Mar 2017 Last revised: 19 Apr 2017

See all articles by Md. Mahmudul Alam

Md. Mahmudul Alam

Universiti Utara Malaysia

Kazi Alam

ASA University Bangladesh (ASAUB)

Anisuzzaman Shuvo

Independent

Date Written: March 30, 2017

Abstract

This paper is an attempt to examine the empirical evidence of International Fisher Effect (IFE) between Bangladesh and its two other major trading partners, China and India. The IFE uses interest rate differentials to explain why exchange rates change over time. A time series approach is considered to trace the relationship between nominal interest rates and exchange rates in these countries. The estimated value, by applying OLS, is used to determine the casual relationship between interest rates and exchange rates for quarterly data from 4th Quarter, 1995 to the 2nd Quarter, 2008. The empirical results suggest that there is a little correlation between exchange rates and interest rates differential for Bangladesh with China and Bangladesh with India, and the relationship between the variables is also not noteworthy for Bangladesh. Further, the trends advocate that the forecasting of exchange rates with the hypothesis of IFE is not realistic for these countries.

Keywords: Purchasing Power Parity (PPP), Exchange Rate, Interest Rate, International Fisher Effect (IFS), Fisher Effect

JEL Classification: F31, C22

Suggested Citation

Alam, Md. Mahmudul and Alam, Kazi and Shuvo, Anisuzzaman, Empirical Evidence of International Fisher Effect in Bangladesh with India and China (March 30, 2017). Alam, M.M., Alam, K.A., and Shuvo, A. 2011. An Empirical Evidence of International Fisher Effect in Bangladesh with India and China: A Time-Series Approach. Elixir Finance Management, 36: 3078-3081. Available at SSRN: https://ssrn.com/abstract=2943419

Md. Mahmudul Alam (Contact Author)

Universiti Utara Malaysia ( email )

Sintok, Kedah
Malaysia

Kazi Alam

ASA University Bangladesh (ASAUB) ( email )

Shyamoli
Dhaka
Bangladesh

Anisuzzaman Shuvo

Independent ( email )

No Address Available

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