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)

Nova Economia, Vol. 13, No. 1, pp. 81-100, January-June 2003

15 Pages Posted: 16 Jan 2004

See all articles by Francisco Carneiro

Francisco Carneiro

The World Bank

Jose Angelo Divino

Catholic University of Brasilia

Carlos Henrique Rocha

Catholic University of Brazil

Abstract

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.

Keywords: Inflation, interest rate, monetary policy, Argentina, Brazil, Mexico

JEL Classification: O42, E31

Suggested Citation

Carneiro, Francisco Galrao and Divino, Jose Angelo and Rocha, Carlos Henrique, 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). Nova Economia, Vol. 13, No. 1, pp. 81-100, January-June 2003. Available at SSRN: https://ssrn.com/abstract=486095

Francisco Galrao Carneiro (Contact Author)

The World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Jose Angelo Divino

Catholic University of Brasilia ( email )

SGAN 916
Office A-118
Brasilia, 70790160
Brazil
+55(61)34487135 (Phone)

Carlos Henrique Rocha

Catholic University of Brazil ( email )

Brasília, DF
Brazil

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