Successive economic cycles and the Fisher effect

The current research is based on the primary notion of testing the Fisher equation in real scenarios across successive economic cycles in primarily two economies: US and India. The modus operandi of the research has been to conduct hypothesis testing for validating whether there exists a strong relationship between nominal and real interest rates with inflation rate in each economy. Analysis of other variables such as gross domestic product (GDP) and GDP per capita growth rate complement the essence of research. The findings of the research have been mixed in nature where the Fisher equation holds good in US but not in India. The economic interpretation of the obtained results is that the Central Bank of India does not exercise adjusting nominal interest rates for accommodating the expected inflation rate on a consistent basis, implying that there is an explicit impact of inflation over real interest rates in the economy.