TESTING OF FISHER HYPOTHESIS IN TURKISH ECONOMY: AN EMPIRICAL ANALYSIS UPON 2002-2014 PERIOD
Journal Title: The Journal of International Social Research - Year 2015, Vol 8, Issue 41
Abstract
Fisher hypothesis argues that expected inflation rate and nominal interest rates have converted with in an economy. This study examines the validity of Fisher hypothesis and the effect of inflation rate on nominal interest rate for 2002:1 to 2014:12 period. For this purpose, we use the cointegration test with multiple structural breaks and the results show that the nominal interest rate and inflation are cointegrated therefore the Fisher hypothesis is confirmed. In addition, it is concluded that nominal interest rate is increased by more than one-for-one in response to an increase in inflation rate. Moreover, the results of VECM (Vector Error Correction Method) Granger causality test indicate that there is unidirectional causal relationship from inflation rate to nominal interest rate.
Authors and Affiliations
Bilge KÖKSEL
Keywords
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