Journal of Social Science Studies
Fisher Effect: Evidence From Money Market in Malaysia
Abstract
The Fisher Effect, proposed by Fisher (1930), has been the subject of many empirical researches in various countries. In Malaysia, previous empirical studies on Fisher Effect have focused the relationship on stock and bond market, leaving the money market with no or very few studies. The Malaysian money market has gained importance and interests as it shows rapid growth in volume transaction. This paper aims at investigating the validity of Fisher Effect on Malaysian money market. The time series between 2000 to 2012 is chosen as the study duration. Three variables were targeted in this study, they are, inflation Rate (INF), 3-months treasury bills rate (MTB) and interbank rate (IBR). To study the relationship, this paper employs Autoregressive Distributed Lag (ARDL) bounds test that is capable of testing for the existence of a long-run relationship between the variables irrespective of whether the time series are I(0) or I(1). The estimation results indicate the presence of long run cointegration among the variables. Overall the study provides evidence on the Fisher Effect in Malaysia.
Full Text:
PDFReferences
Ahmad, S. (2010). The long-run Fisher effect in developing economies. Studies in Economics and Finance, 27(4), 268-275. http://dx.doi.org/10.1108/10867371011085129
Al-khazali, O. (1999). Nominal interest rates and inflation in the Pacific- Basin countries. Management Decision, 37(6), 491-498. http://dx.doi.org/10.1108/00251749910277989
Asari, F. F. A. H., Baharuddin, N. S., Jusoh, N., Mohamad, Z., & Jusoff, N. S. K. (2011). A Vector Error Correction Model ( VECM ) Approach in Explaining the Relationship Between Interest Rate and Inflation Towards Exchange Rate Volatility in Malaysia. World Applied Sciences Journal, 12, 49-56
Bahmani-Oskooee, M., & Gelan, A. (2006). On the relation between nominal devaluation and real devaluation: evidence from African countries. Journal of African Economies, August 29, pp. 1-26. http://dx.doi.org/10.1093/jae/ejl027
Berument, H., & Jelassi, M. M. (2002). The Fisher hypothesis: a multi-country analysis The Fisher hypothesis: a multi-country analysis, 34(April 2013), 1645-1655.
Carneiro, F. G., Ângelo, J., Divino, C. A, & Rocha, C. H. (2002). Revisiting the Fisher hypothesis for the cases of Argentina, Brazil and Mexico. Applied Economics Letters, 9(2), 95-98. http://dx.doi.org/10.1080/13504850110049405
Crichton, D. R., & Guimares-Filho, R. F. (2006). Inflation Dynamics in Malaysia.
Engle, R. F., & Granger, C. W. J. (1987). Cointegration and error correction: representation, estimation and testing. Econometrica, 55, 251-76. http://dx.doi.org/10.2307/1913236
Fah, C. F., & Annuar, N. (2012). A Cointegration Tests on Malaysian Government Securities (MGS) Spreads and Inflation 1. Terengganu International Finance And Economics Journal, 2(1), 15-27.
Fama, E. F. (1975). Short-terms Interest Rates as a Predictors of Inflation. Journal of Financial Economics, 65, 269-282.
Fatima, N., & Sahibzada, S. A. (2012). Empirical Evidence of Fisher Effect in Pakistan. World Applied Sciences Journal, 18(6), 770-773.
Fisher, I. (1930). The Theory of Interest, MacMillan: New York.
Geetha, C., Chong, V., Mohidin, R., & Vivin, V. C. (2011). The Relationship Between Inflation and Stock Market: Evidence from Malaysia, United States and China. International Journal of Economics and Management Sciences, 1(2), 1-16.
Granville, B., & Mallick, S. (2004). Fisher hypothesis: UK evidence over a century. Applied Economics Letters, 11(2), 87-90. http://dx.doi.org/10.1080/1350485042000200169
Gul, E., & Acikalin, S. (2008). An examination of the Fisher Hypothesis: the case of Turkey. Applied Economics, 40, 37-41. http://dx.doi.org/10.1080/00036840600994112
Gul, E., & Ekinci, A. (2006). The Causal Relationship Between Nominal Interest Rates and Inflation: The Case of Turkey. Scientific Journal of Administrative Development, 4, 54-69.
Hassan, H. (1999). Fisher effect in Pakistan. The Pakistan Development Review, 38, 153-66.
Hawati, J., Ruzita, R., Hasimi, Y., & Izani, I. (2010). Stock Returns and Inflation with Supply and Demand Shocks: Evidence from Malaysia. Jurnal Ekonomi Malaysia, 44, 3-10.
Hawtrey, K. M. (1997). The Fisher effect and Australian interest rates. Applied Financial Economics, 7, 337-46. http://dx.doi.org/10.1080/096031097333457
Ibrahim, M. (1999). Macroeconomic Variables and Stock Prices in Malaysia: An Empirical Analysis. Asian Economic Journal, 13(2), 219-231. http://dx.doi.org/10.1111/1467-8381.00082
Johansen, S., & Juselius, K. (1990). Maximum Likelihood Estimation and Inference on Cointegration - With Applications to the Demand for Money. Bulletin of Economics and Statistics, 52(2), 169-210. http://dx.doi.org/10.1111/j.1468-0084.1990.mp52002003.x
Ki-nal & Lahiri. (1988). A model for ex ante real interest rates and derived inflation forecasts. Journal of the America Statistical Association, 83, 665-673. http://dx.doi.org/10.1080/01621459.1988.10478646
Kasman, S., Kasman, A., & Turgutlu, E. (2006). Fisher Hypothesis Revisited: A Fractional Cointegration Analysis. Emerging Markets Finance and Trade, 42(6), 59-76. http://dx.doi.org/10.2753/REE1540-496X420604
Ling, T., Liew, V. K., & Syed, A. W. S. K. W. (2007). Fisher hypothesis: East Asian evidence from panel unit root tests. Munich Personal Repec Archieve, (5432).
Nezhad, M. Z., & Zarea, R. (2007). Investigating the Causality Granger Relationship between the Rates of Interest and Inflation in Iran. Journal of Social Science, 3(4), 237-244. http://dx.doi.org/10.3844/jssp.2007.237.244
Nusair, S. A. (2008). Testing for the Fisher hypothesis under regime shifts: an application to Asian countries. International Economic Journal, 22(2), 273-284. http://dx.doi.org/10.1080/10168730802095660
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326. http://dx.doi.org/10.1002/jae.616
Pesaran, M. H., Shin, Y., & Smith, R. P. (1999). Pooled Mean Group Estimation of Dynamic Heterogeneous Panels. Journal of the American Statistical Association, 94, 37-41.
R. van der Merwe, E. Wan, & Julier, S. J. (2004). Sigma-Point KalmanFilters for Nonlinear Estimation and Sensor-Fusion: Applications to Integrated Navigation. In Proceedings of the AIAA Guidance, Navigation & Control Conference, Providence. http://dx.doi.org/10.2514/6.2004-5120
Ur, H., Khan, S., & Ahmad, I. (2004). Does Fisher Effect Exist in Pakistan? A Cointegration Analysis. Pakistan Economic and Social Review, 42(1), 21-37.
DOI: https://doi.org/10.5296/jsss.v1i2.4915
Refbacks
- There are currently no refbacks.
Copyright (c) 2014 Nurazilah Zainal, Annuar Md Nassir, Mohamed Hisham Yahya
This work is licensed under a Creative Commons Attribution 4.0 International License.
Journal of Social Science Studies ISSN 2329-9150
Copyright © Macrothink Institute
To make sure that you can receive messages from us, please add the 'macrothink.org' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders. If you have any questions, please contact: jsss@macrothink.org
-----------------------------------------------------------------------------
