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)

Carneiro, Francisco; Divino, Jose Angelo; Rocha, Carlos Henrique

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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

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: 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