Fisher Effect Research Articles

Fishing behaviours and fisher effect in decision‐making processes when facing depredation by marine predators

AbstractFishers aim to optimise cost–benefit ratios of their behaviour when exploiting resources. Avoidance of interactions with marine predators (i.e. their feeding on catches in fishing gear, known as depredation) has recently become an important component of their decisions. How fishers minimise these interactions whilst maximising fishing success is poorly understood. This issue is addressed in a sub‐Antarctic, long‐line fishery confronted with extensive depredation by sperm whales Physeter macrocephalus and killer whales Orcinus orca by examining a 15‐year data set. Whereas a broad range of behaviours was identified from spatio‐temporal and operational descriptors, none combined high fishing success with low frequency of interactions. With experience, fishers favoured exploitation of productive patches with high frequencies of interactions over avoidance behaviours. Such decisions, although potentially optimal in the short term, are likely to intensify pressures on fish stocks and impact depredating whales. Therefore, the present study provides additional evidence to inform management decisions pertaining to the coexistence between fisheries and marine predators.

Examining the Drivers of Stock Prices of Private Sector Banks in India

Indian private sector banking stocks have been rebounding from a massive selloff. Private sector banks which have traditionally maintained their asset quality and profitability when compared to their public-sector counterparts, have recently seen their asset quality erode. Given that private sector banks play an influential role in the Indian economy it would be helpful to understand the key drivers of private bank stock prices. This paper studied the influence of some key micro and macro determinants on the stock prices of all listed private sector banks in India over the 12 years from 2008-2019. Panel regression models were fit to study the relationship between the variables. Liquidity, profitability, growth, inflation and exchange rate indicators proved to be important influencers of the stock prices of private sector banks in India. The study provides evidence for the Fisher effect suggesting that private bank stocks can provide good inflation-adjusted returns over time. Stakeholders of these banks can focus on these determinants which contribute to shareholder value over time.

The Fisher effect on long-term U.K. interest rates in alternative monetary regimes: 1844-2018

ABSTRACT The Fisher Effect is one of the most widely studied relationships in monetary economics. Previous studies have found little evidence of a Fisher effect in pre-World War I data for the United Kingdom. An explanation for this is the near white noise property of the inflation rate under the Classical Gold Standard. There is more evidence of a Fisher effect in the post-World War II years when the inflation rate showed more persistence. This paper studies the evidence on the Fisher effect over the time period 1844-2018. This period covers several distinct monetary regimes. The monetary regime is an important factor determining the time series behavior of the inflation rate which, in turn, has been shown to be crucial to the strength of the Fisher effect. Distinctive features of the study are the focus on the long-term interest rate and coverage of the current inflation targeting regime in the United Kingdom.

The validity of the Fisher effect for an inflation targeting country

The aim of this paper is to investigate the relationship between interest and inflation rates. In this regard, the validity of the Fisher Effect under an inflation targeting regime country is examined by considering the possibility of non-linearities. To this aim, the Fisher Effect is analysed by using various types of interest rates to identify the short-, mid- and long-term dynamics. Autoregressive distributed lag (ARDL) and non-linear autoregressive distributed lag (NARDL) models were estimated for Turkish economy between 2006-2019 periods. The empirical findings of ARDL models reveal the validity of Fisher Effect both for short and long run. The results of NARDL models indicate a strong Fisher Effect in the long run, except for 5-year government bonds. For short-run, the Fisher Effect holds only when inflation rises and there is no significant result when inflation decreases.

Monetary Policy Interdependency in Fisher Effect: A Comparative Evidence

Abstract In this paper, we examine the ability of Fisher effect to describe the subjective behaviour of monetary policy responses for nations constrained by global factors. We developed and estimated a simple DSGE model for appraising the consequence of an integrated financial market predictor on national monetary policy response in Africa’s largest economies – Nigeria and South Africa. The paper integrated the theoretical intuition of the famous Fisher effect on the New Keynesian DSGE model with global predictors to describe national monetary policy response as it influence domestic financial variables and macroeconomic fundamentals. Simulations show that the existence of global factors threatens the abilities of national monetary policy to predict financial variables and macroeconomic fundamentals in their economies.

The federal funds rate effect on subprime mortgage crisis management: An ARDL approach

This research empirically investigated the effectiveness of the interest rate policy of the Federal Reserve (Fed) on managing the subprime mortgage crisis. The study employed the autoregressive distributed lag model (ARDL) to analyze the stability of the Fed’s monetary policy, thereby providing an alternative analysis tool. Correlation analysis results showed a strong positive and statistically significant relationship between Fed funds rate and the labor market, a strong negative and statistically significant relationship between Fed funds rate and the housing market, and a strong negative and statistically significant relationship between Fed funds rate and price stability. In contrast, results of the ARDL model bounds test for cointegration indicated that house price index (HPI), labor market, and price stability were cointegrated, hence exhibiting a long-run relationship with Fed funds rate. This research demonstrates that additional empirical studies using new techniques are required to reevaluate the Fisher effect and expand the understanding of the mechanism between interest rates and inflation. This issue is extremely important, particularly for countries such as the U.S., the UK adapting inflation targeting policy using interest rates as an operational target.

Practical Approach to estimating Cost of Equity for Valuing Private Company in Emerging Markets: The Case of Tanzania

The growth of financial markets in emerging countries and increased influence of globalization has made the analysis and assessment of equity risk premium a critical component of equity valuation in recent years. This article attempts to pragmatically show how one can estimate the cost of equity for unquoted companies in emerging markets like Tanzania by using Capital Asset Pricing Model (CAPM). Generally, the article attempts to pragmatically estimate equity betas for selected 12 quoted companies in Tanzania using Market Model (MM). The Market Model parameters have been estimated by Ordinary Least Square (OLS) regression. The raw equity betas have been generated for the selected 12 actively traded companies on Dar es Salaam Stock Exchange (DSE) for a period of 2007 - 2016 and OLS regression estimation errors have been corrected using Vasicek’s beta adjusting model and Bloomberg’s beta adjustment model. The article has also pragmatically estimated a second key input of the CAPM; the Equity risk premium (ERP) for Tanzania and a few other selected African countries. The ERP has been estimated by using two methods: firstly, the conventional approach and secondly, the International Fisher Effect model. Finally, the Monographic article has pragmatically demonstrated how one can estimate the cost of equity for a private company in emerging markets such as Tanzania.

Modelling inflation-interest rate nexus for Ghana

Purpose: The research assesses the interest rates-inflation association in the case of Ghana between 2007 and 2013. Monthly and quarterly data were used. Research Methodology: The model of the vector error correction and Johansen were used to investigate the long-term and short-term association in the model estimated respectively. The vector autoregression (VAR) test was used to model the joint dynamics between the variables. GRETL software was used in these tests. Granger predictive test was done with the EViews software. Results: The findings of the result confirm both long-run and a short-run association in the model and as well as neutral granger predictive causality. Limitations: Though the Johansen test is more appropriate for multivariate modelling, Engle-Granger test is considered to be more robust in most cases and as such future studies should consider using the two models in a comparative study to assess whether the current conclusions can collaborate. Contribution: The paper contributes to knowledge in the field of inflation and Interest rates association, in relation to the financial markets. Future Research models that account for structural breaks and panel works are worth doing. Keywords: Fisher effect, Treasury bill rates long run, Johansen model

The Relationship between Inflation and Interest Rates in the UK: The Nonlinear ARDL Approach

Abstract This study reconsiders the Fisher effect for the UK from a different methodological perspective. To this aim, the nonlinear ARDL model recently developed by Shin et al. (2014), is applied over the periods of 1995M1-2008M9 and 2008M10-2018M1. This model decomposes the changes in original inflation series as two new series: increases and decreases in inflation rates. Hence, it enables us to examine the Fisher effect in terms of increases and decreases in inflation separately. The empirical findings support asymmetrically partial Fisher effects for the UK in the long-run only for the first period. Additionally, this study attempts to describe and introduce a different version of the partial effect concept for the first time for the UK.

Is Neo-Fisherism ‘alive’ in South Africa? A frequency domain causality approach

ABSTRACT There is a new wave of monetary thought popularized in industrialized economies going under the banner of Neo-Fisherism. Proponents of this school of thought assume that there exists reverse causality in the conventional Fisher effect in which interest rates cause movements in expected inflation instead of interest rates being driven by inflation expectations. We examine whether the Neo-Fisherian hypothesis holds for the South African economy as an inflation-targeting emerging economy characterized by moderate inflation and policy rates. Using frequency-domain causality tests on quarterly repo rate and inflation expectations data collected between 2002:q3 and 2019:q2, we find evidence of uni-directional causality from repo rates to inflation expectations over the short- and long-run. Policy implications of these findings are discussed.

Non-parametric analysis of the relationship between inflation and interest rate in the context of Fisher effect for Turkish economy

ABSTRACT Inflation is an increase in the general level of prices which indicates a decrease in the purchasing power of households and a decrease in their real income. The level of interest rates in an economy plays an important role in entrepreneurs’ investment decisions. The Fisher Effect is known as a positive relation between the inflation rate and interest rates, with causality running from inflation rates to interest rates. However, the results of research in the economics literature conducted with different countries and methods on the Fisher Effect have differences. In recent years, linearity methods have been abandoned to examine asymmetric relationships between variables, and nonlinear methods have gained importance. In this study, the relationship between interest rates and inflation in the Turkish economy is examined with nonlinear Granger Causality Analysis in the context of Fisher Effect using monthly data. As a result of the study, a unidirectional causal relationship is detected from inflation to interest rates for the Turkish economy. Also, the Fisher hypothesis is found to be valid for Turkey.

The Dynamics Between Monetary Policy Rate and Inflation in the Philippines

The paper examines the relationship between interest rate and inflation in the Philippines using 204 monthly observations from January 2003 to December 2019. The variables were tested using Vector Autoregression, Granger Causality, Impulse Response Function, Cholesky Variance Decomposition, Johansen Cointegration, and Vector Error Correction. The results confirmed the existence of Fisher Effect and a unidirectional causality function to interest rate from inflation. The immediate response of interest rate to a positive standard deviation shock to inflation was recorded in the second period and inflation accounts for a periodic average of 4.72% forecast error variance of interest rate in the short run. The empirical analysis also validated the existence of significant positive short-run and long-run relationship between the two variables.

중국과 대만에 대한 피셔효과의 재검정 - 구조적 단절을 고려한 공적분 분석 -

중국과 대만에 대한 피셔효과의 재검정 - 구조적 단절을 고려한 공적분 분석 -

Емпірична оцінка внутрішнього та міжнародного ефектів Фішера для економіки України

The article works out the essence of theoretical concepts of both the internal and the international effects named after I. Fisher. A review of professional publications gave reason to conclude that in the countries with higher levels of marketing of the economy, the strength of these effects is higher, which indicates a higher level of integration of their national financial markets into the global financial market. Based on the results of an econometric analysis, the authors have concluded about the relative weakness of the internal Fisher Effect and, consequently, on the need to use multifactor analysis in the study of the dynamics of the real interest rate in Ukraine. The empirical evaluation of the dependencies of monetary variables in the model describing the international Fisher Effect gave reason to conclude about the relative weakness of this effect, in particular for the currency pair of «dollar – hryvnia», and therefore, the differential of national interest rates is not sufficient basis for forecasting the dynamics of the foreign exchange rate. The article uses a number of statistical criteria and tests to examine the used econometric model, which gave grounds to conclude about its adequacy and statistical significance of variables. The authors elaborated the factors that have a restrictive impact on the international movement of capital and therefore can cause differences in the real interest rates, especially in emerging markets, namely: asymmetry of market information, psychological barriers, national legislative restrictions that quota the international capital flows, high transactional costs, peculiarities of the tax system, currency risks, political risks, etc. The thesis that the presence of weak Fisher Effects for the Ukrainian economy is one of the reasons for the low effectiveness of the interest channel of the transfer mechanism of monetary policy in Ukraine is substantiated.

Test Međunarodnog Fišerovog efekta - istraživanje iz Srbije i Evropske unije

The aim of this paper is to explore the International Fisher Effect (IFE) between Serbia and European Union (EU) in period between 2004 and 2015. The authors in this paper explore the IFE by applying regression analysis. They were used historical annual data for exchange rates, real interest rate and inflation, in this research. Like a home country and foreign country the authors were used each of these areas (Serbia and EU) like interchangeably and track the trail of the effect. Explore was based on the time series of observed annual data in period between 2004 and 2015. The authors were used the data of authorized central banks from databases: the World Bank, the National Bank of Serbia and the European Central Bank. Regression analysis was performed using a software package SPSS 20. The contribution of this paper is reflected in the obtained results.The results show that a 1% increase in the nominal interest rate differential, on average, lead to approximately a 0.3% offsetting change in the exchange rate in both cases (Serbia-home EU-foreign and EU-home Serbia-foreign).The coefficients of determination R2 are very low, also in both cases. Only 3.3% of the annual changes in the RSD/EUR exchange rate and 4.2% of the annual changes in the EUR/RSD exchange rate can be explained by the nominal interest differentials. Therefore, about 96% of the annual changes in the exchange rates depend on other factors.

Testing fisher effect for the USA: application of nonlinear ARDL model

Purpose This paper aims to investigate the presence of the Fisher effect for the USA from a new methodological perspective differing it from all previous studies using the common linear representation of the Fisher equation. Design/methodology/approach The nonlinear ARDL model, recently developed by Shin et al. (2014), is applied for the 10-year US Government bond rates over the period of 1985M1-2017M10. Findings The empirical findings indicate that the US Federal Reserve (FED) is a more predominant arbiter in the determination of interest rates during periods of declining inflation rates than periods of rising inflation rates. This finding may allow the FED to apply more proactive and prudent monetary policy. Additionally, this study newly describes and introduces a different version of the partial Fisher effect and extends the Fisher equation to some degree in terms of the partial Fisher effect. Originality/value To the best the authors’ knowledge, this method is applied for the first time in testing the Fisher effect for the USA.

A Paradox: An Empiric Approach to Inflation-Interest Rates Relationship: Evidence from Turkey

In today’s world where the independence of central banks is questioned and the recessionary process is discussed, serious debates are experienced between economists and policy makers regarding the paradoxical relationship between two important macro-economic variables; Is inflation the cause of interest rate or is interest rate the cause of inflation? Determination of the causality and its direction is very crucial for the economies which are trying to extricate themselves from the high inflation – high interest rate spiral. The researchers searching for an answer to these discussions have conducted various analyses to test the validity of the Fisher Effect. In these analyses, inflation rate and nominal interest rate -as per the hypothesis- were considered as the variables. However, economic agents make their decisions depending on real values rather than nominal values. The purpose of this study is to provide a real and up-to-date approach to these debates which actually began in 1700s and have been ongoing in the triangle of financial markets-central banks-policy makers. For this purpose, the monthly averages regarding the 2011:01-2019:06 period of Turkey were calculated based on the Weighted Average Cost of Funding (WACF) daily data of The Central Bank of the Republic of Turkey (CBRT) and subjected to the cointegration analyses with the annual CPI figures. While Engle-Granger Test was used to test the long-term relationship, Granger Causality Test was performed to determine the relationship and its direction in the short term through VECM. As a result of the analysis, bilateral causality among variables was determined in the short term. In other words, inflation is a cause of interest rate and interest rate is a cause of inflation. This study makes a contribution to the literature since no study, which detected a bilateral correlation, has been found.

Inflation Hedging Properties of Different Asset Classes in Malaysia

Manuscript type: Research paper Research aims: The objective of this study is to examine the inflation hedging properties of various asset classes (stock, gold, real estate, Treasury bond and Treasury bill) in the Malaysian context. Design/Methodology/Approach: This is an empirical analysis using quarterly data from the period of 1980 to 2016. The Autoregressive Distributed Lag (ARDL) bounds cointegration model is used for testing the long-run relationship while the error correction model (ECM) is used for testing the short-run dynamics. Research findings: Our results show that stocks and government bonds in Malaysia can provide a complete hedge against inflation in the long-run while real estate shows partial hedging evidence. Gold and Treasury bills, however, are not inflation hedges. For the shortrun, stocks, gold and real estate show evidence of rapid adjustment to changes in inflation while government securities indicate a mild adjustment. Theoretical contributions/Originality: First, this study provides new evidence on inflation hedges from the perspective of an emerging market. Second, this study uses the ARDL and ECM approach to study the long-run and short-run dynamics of asset returns and inflation. This is in contrast to many previous studies that mainly used the Ordinary Least-Squares (OLS) analysis. Third, this study is important for the Malaysian market because previous studies in Malaysia had merely focussed on stock returns and inflation. This study broadens the scope by including different asset classes. Practitioner/Policy implications: The implication to investors and fund managers is that they should consider stocks, real estate and Treasury bonds in their investment portfolios, given that these asset returns offer satisfactory protection against inflation. Research limitations/Implications: The result discussed in this study may be specific to the data and methodology employed in the analysis; thus, it is not applicable to other periods nor other emerging markets. Future studies on inflation hedges may consider a comparative study of a cross-section of countries or use an expanded array of assets in the analysis. Keywords: Fisher Effect, Inflation Hedges, ARDL Bounds Tests, Malaysia JEL Classification: G12, G18

Conventional and Islamic banks deposit rates as inflation hedges: the case of Malaysia

Purpose The purpose of this paper is to examine the extent to which conventional and Islamic bank fixed deposit rates can protect depositors against inflation in the Malaysia context. Design/methodology/approach Nominal interest rates are represented by commercial bank fixed deposit and investment bank fixed deposit rates. The authors use monthly data over the period 2000–2016. The authors apply the autoregressive distributed lag bounds testing methodology to test the existence of long-run relationship between nominal rates and inflation, and the error-correction model to test for the short-run dynamics. Findings The results show that the nominal interest rate and inflation are cointegrated for all the data series. The evidence indicates that all the fixed deposit rates, for both conventional and Islamic banks are effective inflation hedges in the long-run thereby supporting the Fisher hypothesis. There is no difference in the inflation hedging ability between conventional bank rates and Islamic bank rates. However, the authors find no evidence of the short-run relationship between interest rates and inflation for either bank. Practical implications Bank regulators should be concerned on the similarities in behaviour towards inflation between conventional and Islamic rates, given that the deposit rates for both banks are supposedly set based on different premises. Bank customers, they should deposit their money for the long horizon in order to protect themselves against inflation. Depositors worrying about inflation should be indifferent between conventional or Islamic as both banks provide similar inflation hedging characteristics. Originality/value The novelty of this study is in using the bank fixed deposit rates to study the Fisher effect in an emerging market and in comparing the conventional and Islamic bank rates in terms of their inflation hedging ability.

Interest rates, inflation, and the Fisher effect in China

ABSTRACTThe paper estimates the relationship between the nominal Treasuries rate and inflation in China. The dynamic econometric analysis yields a preferred, automatically reduced, empirical model revealing a Fisher effect. But the results are sensitive to using different sub-samples encompassed in the decade-and-a-half period following the disassociation of Treasuries from the People’s Bank of China administered interest rates at the end of the 1990s.