TESTING THE DYNAMIC RELATIONSHIP OF INFLATION AND INTEREST RATES: FISHER EFFECT TESTING
Keywords:
Dynamic Relationship, Inflation, Interest Rate, Fisher Effect
Abstract
This paper aims to investigate the testing of the dynamic relationship between inflation and interest rates, commonly known as the Fisher Effect, in both developed and developing countries. Testing The Fisher Effect is performed using dynamic models that include testing cointegration, testing with Error Correction Model (ECM), and testing with Autoregressive Distributed Lag (ADL). The use of dynamic models is chosen because the change of an economic variable no in a manner instantly causes the change of another economic variable at the same time, however, there is a time lag. The empirical test results show that: (1) the Fisher Effect occurs in developed countries and developing countries, both in the short term and in the long term, which means that the expected inflation affects positively the nominal interest rate in developed countries and developing countries, both in the short term and long term, (2) the determination of the nominal interest rate by commercial banks this month is influenced by inflation information in the previous month, or in other words, there is a time lag in the effect of inflation on interest rates.
References
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Anari, A., & Kolari , J. (2016). Dynamics of interest and inflation rates. Journal of Empirical Finance, 39, 129-144.
Bayat, T., Kayhan, S., & Taşar, İ. (2018). Re-visiting fisher effect for fragile five economies. Journal of Central Banking Theory and Practice, 7 (2), 203-218.
Costantini, M., & Lupi , C. (2007). An analysis of inflation and interest rates. New panel unit root results in the presence of structural breaks. Economics Letters, 95 (3), 408-414.
Dogan, I., Orun , E., Aydın, B., & Afsal , MS (2020). Non-parametric analysis of the relationship between inflation and interest rate in the context of Fisher effect for Turkish economy. International Review of Applied Economics, 34 (6), 758-768.
Fajar, M. (2010), Empirical Study of the Fisher Effect in Indonesia (Period: 1992-2010). Working Papers.
Gujarati, DN, & Porter, DC (2009). Basic econometrics. Fifth Edition. New York: McGraw-Hill Irwin.
Jareño, F., & Tolentino, M. (2012). The Fisher effect in the Spanish case: A preliminary study. Asian Economic and Financial Review, 2 (7), 841-857.
Mankiw, N. Gregory. ( 2007 ) . Macroeconomics. Sixth Edition, Worth Publishers, USA.
Maryanti, E. (2021). Apakah Tingkat Suku Bunga Sertifikat Bank Indonesia mampu memoderasi Determinan Yield to Maturity?. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 5(1), 1416-1427. https://doi.org/10.31955/mea.v5i1.768
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Nurhasanah, S., Puri, P. A., & Wilis, R. A. (2021). Pengaruh Harga Minyak Dunia, Harga Emas Dunia, Tingkat Inflasi, Kurs Rupiah, Indeks Dow Jones dan Indeks Shanghhai Composite terhadap Indeks Harga Saham Gabungan yang Terdaftar Di Bursa Efek Indonesia Periode 2015-2019. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 5(3), 2935-2949. https://doi.org/10.31955/mea.v5i3.1776
Omay, T., Yuksel , A., & Yuksel , A. (2015). An empirical examination of the generalized Fisher effect using cross-sectional correlation robust tests for panel cointegration . Journal of International Financial Markets, Institutions and Money, 35, 18-29.
Ongan, S., & Gocer , I. (2020). Testing the fisher effect for the USA: application of the nonlinear ARDL model. Journal of Financial Economic Policy, 12 (2), 293-304.
Ongana, S., & Gocerb, I. (2020). The Relationship between Interest Rates and Inflation: Examining the Fisher Effect in China. Frontiers of Economics in China, 15 (2), 247-256.
Priyandini, S., & Wirman, W. (2021). Pengaruh Nilai Tukar (Kurs) dan Inflasi terhadap Nilai Aktiva Bersih Reksa Dana Syariah di Indonesia Tahun 2015-2019. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 5(1), 852-868. https://doi.org/10.31955/mea.v5i1.493
Setiawan, R. (2009). Testing the Dynamic Model of the Relationship of Inflation and Interest Rates in Indonesia (1996-2008 Period). Working Papers.
Sipahutar, T. T. U., Anjelina, S., Andriyani, F., & Yani, A. I. Y. (2021). Pengaruh Pengangguran (Tenaga Kerja), Kemiskinan, Inflasi dan Konsumsi terhadap Pendapatan Domestik Regional Bruto Sumatera Utara Periode 2015-2019. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 5(2), 1459-1474. https://doi.org/10.31955/mea.v5i2.1252
Sjölander, P., Månsson, K., & Shukur, G. (2017). Testing for panel cointegration in an error-correction framework with an application to the Fisher hypothesis. Communications in Statistics-Simulation and Computation, 46 (3), 1735-1745.
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Utami, S., Sinaga, R. L., Namira, F., & Astuty, F. (2021). Pengaruh Inflasi, Return on Assets (ROA), Debt to Equity Ratio (DER) terhadap Return Saham pada Sektor Industri Barang Konsusi (Consumer Goods) yang Terdaftar di Bursa Efek Indonesia (BEI) Periode 2015-2019. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 5(2), 621-637. https://doi.org/10.31955/mea.v5i2.1091
Wahyuningsih, A., Wiyono, G., & Maulida, A. (2021). Pengaruh Dana Pihak Ketiga, Kecukupan Modal, Inflasi dan Suku Bunga Kredit terhadap Profitabilitas Bank Konvensional. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 5(1), 1136-1150. https://doi.org/10.31955/mea.v5i1.930
Wallace, MS, & Warner, JT (1993). The Fisher effect and the term structure of interest rates: Tests of cointegration. The Review of Economics and Statistics, 320-324.
Westerlund, J. (2005). New simple tests for panel cointegration. Econometric Reviews, 24 (3), 297-316.
Westerlund, J. (2005). Panel cointegration tests of the Fisher hypothesis. Lund University, Department of Economics Working Papers, 10, 1-34.
Westerlund, J. (2008). Panel cointegration tests of the Fisher effect. Journal of applied econometrics, 23 (2), 193-233.
Wulandari, W., Suhono, S., & Manda, G. S. (2021). Pengaruh Tingkat Suku Bunga dan Inflasi terhadap Return Saham pada Perusahaan Manufaktur Terindeks LQ 5 Periode 2016-2020. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 5(2), 1043-1049. https://doi.org/10.31955/mea.v5i2.1150
Anari, A., & Kolari , J. (2016). Dynamics of interest and inflation rates. Journal of Empirical Finance, 39, 129-144.
Bayat, T., Kayhan, S., & Taşar, İ. (2018). Re-visiting fisher effect for fragile five economies. Journal of Central Banking Theory and Practice, 7 (2), 203-218.
Costantini, M., & Lupi , C. (2007). An analysis of inflation and interest rates. New panel unit root results in the presence of structural breaks. Economics Letters, 95 (3), 408-414.
Dogan, I., Orun , E., Aydın, B., & Afsal , MS (2020). Non-parametric analysis of the relationship between inflation and interest rate in the context of Fisher effect for Turkish economy. International Review of Applied Economics, 34 (6), 758-768.
Fajar, M. (2010), Empirical Study of the Fisher Effect in Indonesia (Period: 1992-2010). Working Papers.
Gujarati, DN, & Porter, DC (2009). Basic econometrics. Fifth Edition. New York: McGraw-Hill Irwin.
Jareño, F., & Tolentino, M. (2012). The Fisher effect in the Spanish case: A preliminary study. Asian Economic and Financial Review, 2 (7), 841-857.
Mankiw, N. Gregory. ( 2007 ) . Macroeconomics. Sixth Edition, Worth Publishers, USA.
Maryanti, E. (2021). Apakah Tingkat Suku Bunga Sertifikat Bank Indonesia mampu memoderasi Determinan Yield to Maturity?. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 5(1), 1416-1427. https://doi.org/10.31955/mea.v5i1.768
Mishkin, FS (1992). Is the Fisher effect for real? A reexamination of the relationship between inflation and interest rates. Journal of Monetary economics, 30 (2), 195-215.
Nurhasanah, S., Puri, P. A., & Wilis, R. A. (2021). Pengaruh Harga Minyak Dunia, Harga Emas Dunia, Tingkat Inflasi, Kurs Rupiah, Indeks Dow Jones dan Indeks Shanghhai Composite terhadap Indeks Harga Saham Gabungan yang Terdaftar Di Bursa Efek Indonesia Periode 2015-2019. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 5(3), 2935-2949. https://doi.org/10.31955/mea.v5i3.1776
Omay, T., Yuksel , A., & Yuksel , A. (2015). An empirical examination of the generalized Fisher effect using cross-sectional correlation robust tests for panel cointegration . Journal of International Financial Markets, Institutions and Money, 35, 18-29.
Ongan, S., & Gocer , I. (2020). Testing the fisher effect for the USA: application of the nonlinear ARDL model. Journal of Financial Economic Policy, 12 (2), 293-304.
Ongana, S., & Gocerb, I. (2020). The Relationship between Interest Rates and Inflation: Examining the Fisher Effect in China. Frontiers of Economics in China, 15 (2), 247-256.
Priyandini, S., & Wirman, W. (2021). Pengaruh Nilai Tukar (Kurs) dan Inflasi terhadap Nilai Aktiva Bersih Reksa Dana Syariah di Indonesia Tahun 2015-2019. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 5(1), 852-868. https://doi.org/10.31955/mea.v5i1.493
Setiawan, R. (2009). Testing the Dynamic Model of the Relationship of Inflation and Interest Rates in Indonesia (1996-2008 Period). Working Papers.
Sipahutar, T. T. U., Anjelina, S., Andriyani, F., & Yani, A. I. Y. (2021). Pengaruh Pengangguran (Tenaga Kerja), Kemiskinan, Inflasi dan Konsumsi terhadap Pendapatan Domestik Regional Bruto Sumatera Utara Periode 2015-2019. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 5(2), 1459-1474. https://doi.org/10.31955/mea.v5i2.1252
Sjölander, P., Månsson, K., & Shukur, G. (2017). Testing for panel cointegration in an error-correction framework with an application to the Fisher hypothesis. Communications in Statistics-Simulation and Computation, 46 (3), 1735-1745.
Thomas, Lloyd B. (1997). Money, Banking, and Financial Markets. Irwin-McGraw Hill.
Utami, S., Sinaga, R. L., Namira, F., & Astuty, F. (2021). Pengaruh Inflasi, Return on Assets (ROA), Debt to Equity Ratio (DER) terhadap Return Saham pada Sektor Industri Barang Konsusi (Consumer Goods) yang Terdaftar di Bursa Efek Indonesia (BEI) Periode 2015-2019. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 5(2), 621-637. https://doi.org/10.31955/mea.v5i2.1091
Wahyuningsih, A., Wiyono, G., & Maulida, A. (2021). Pengaruh Dana Pihak Ketiga, Kecukupan Modal, Inflasi dan Suku Bunga Kredit terhadap Profitabilitas Bank Konvensional. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 5(1), 1136-1150. https://doi.org/10.31955/mea.v5i1.930
Wallace, MS, & Warner, JT (1993). The Fisher effect and the term structure of interest rates: Tests of cointegration. The Review of Economics and Statistics, 320-324.
Westerlund, J. (2005). New simple tests for panel cointegration. Econometric Reviews, 24 (3), 297-316.
Westerlund, J. (2005). Panel cointegration tests of the Fisher hypothesis. Lund University, Department of Economics Working Papers, 10, 1-34.
Westerlund, J. (2008). Panel cointegration tests of the Fisher effect. Journal of applied econometrics, 23 (2), 193-233.
Wulandari, W., Suhono, S., & Manda, G. S. (2021). Pengaruh Tingkat Suku Bunga dan Inflasi terhadap Return Saham pada Perusahaan Manufaktur Terindeks LQ 5 Periode 2016-2020. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 5(2), 1043-1049. https://doi.org/10.31955/mea.v5i2.1150
Published
2022-04-28
How to Cite
Setiawan, R. (2022). TESTING THE DYNAMIC RELATIONSHIP OF INFLATION AND INTEREST RATES: FISHER EFFECT TESTING. Jurnal Ilmiah Manajemen, Ekonomi, & Akuntansi (MEA), 6(1), 1030-1041. https://doi.org/10.31955/mea.v6i1.2942
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Articles
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