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The long‐run Fisher effect in developing economies

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  • Shabbir Ahmad

Abstract

Purpose - The purpose of this study is to test the validity of Fisher effect for four South Asian and two oil‐producing countries, namely India, Bangladesh, Pakistan, Sri Lanka, Kuwait and Saudi Arabia. Design/methodology/approach - The autoregressive distributed lag‐bound testing approach is used which is capable of testing the long‐run relationship irrespective of whether the underlying series are individually I(0) or I(1). Findings - The estimation results indicate the presence of weak form of Fisher effect in India, Pakistan, Kuwait and Saudi Arabia, while the hypothesis of the existence of Fisher effect is not supported for Bangladesh and mixed results are found for Sri Lanka. Practical implications - The results help monetary authorities to formulate better monetary policy, besides many other far reaching macroeconomic implications for each economy. Originality/value - The use of a variety of interest rates and the use of a relatively new technique in Fisher effect is tested in developing economies.

Suggested Citation

  • Shabbir Ahmad, 2010. "The long‐run Fisher effect in developing economies," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 27(4), pages 268-275, October.
    • Handle: RePEc:eme:sefpps:v:27:y:2010:i:4:p:268-275
    DOI: 10.1108/10867371011085129
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    References listed on IDEAS

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    1. Bardsen, Gunnar, 1989. "Estimation of Long Run Coefficients in Error Correction Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(3), pages 345-350, August.
    2. repec:clg:wpaper:1998-09 is not listed on IDEAS
    3. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    4. Koustas, Zisimos & Serletis, Apostolos, 1999. "On the Fisher effect," Journal of Monetary Economics, Elsevier, vol. 44(1), pages 105-130, August.
    5. William J. Crowder, 1997. "The Long-Run Fisher Relation in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1124-1142, November.
    6. James B. Bullard, 1999. "Testing long-run monetary neutrality propositions: lessons from the recent research," Review, Federal Reserve Bank of St. Louis, vol. 81(Nov), pages 57-77.
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    Cited by:

    1. Muhammad Irfan Javaid Attari, 2012. "Inflation and Wheat Prices in Pakistan: 1990-2010," EuroEconomica, Danubius University of Galati, issue 4(31), pages 72-86, November.
    2. Shabbir Ahmad, 2017. "Sustainability of the Current Account: Evidence from Pakistan," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 68-72.
    3. Nurazilah Zainal & Annuar Md Nassir & Mohamed Hisham Yahya, 2014. "Fisher Effect: Evidence From Money Market in Malaysia," Journal of Social Science Studies, Macrothink Institute, vol. 1(2), pages 112-124, July.
    4. Rodionova, Alena (Родионова, Алена), 2014. "Formation of long-term rate of return: Fisher effect in the markets of public debt of developing countries [Формирование Долгосрочного Уровня Доходности: Эффект Фишера На Рынках Государственного До," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 116-139.

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