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An examination of the Fisher Hypothesis: the case of Turkey

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Abstract:

This study examines the famous Fisher Hypothesis (FH) for Turkey. FH asserts that nominal interest rates adjust on a one-to-one basis to expected changes in inflation rates. Using the Johansen cointegration method for the Turkish monthly interest rate and inflation rate data, we find that it is possible to determine the long-run relationship—but not the one-to-one basis—between nominal interest rates and inflation. Our findings suggest that full FH does not hold but there is a very powerfull Fisher effect in the case of Turkey from 1990 to 2003.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840600994112

Affiliations: 1: Department of Economics, Bilecik University, School of Economics and Administrative Sciences, 11100 Bilecik, Turkey 2: Department of Economics, Dumlupinar University, Kutahya, Turkey

Publication date: December 1, 2008

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