Autoregressive Distributed Lag (ARDL) approach for re-testing the Fisher effect in Indonesia

Authors

  • Lilis Yuliati Departement of Economics and Development Studies, Faculty of Economics and Business, University of Jember, Indonesia
  • Ananda Fauziah Mukti Departement of Economics and Development Studies, Faculty of Economics and Business, University of Jember, Indonesia
  • Riniati Departement of Economics and Development Studies, Faculty of Economics and Business, University of Jember, Indonesia

DOI:

https://doi.org/10.22437/ppd.v8i3.9200

Keywords:

Autoregressive Distributed Lag, Fisher hypothesis, Inflation, Interest rate

Abstract

This article discusses about re-testing the validity of the Fisher hypothesis in Indonesia. By using Autoregressive Distributed Lag (ARDL) approach, we will know if there is any causality between interest rate and inflation or not, for the long-term relationship. Interest rate divided into two main points, real interest rate and nominal interest rate. Hence, there are three main variables for this research, inflation, real interest rate and nominal interest rate. We applied the bound test to know cointegration between variables. The result shows that there is no evidence of long-term relationship and short term relationship between nominal interest rate and inflation in Indonesia.

Downloads

Download data is not yet available.

References

BAPPENAS. (2009). Penguatan ekonomi daerah : Langkah Menghadapi Krisis Keuangan Global. https://www.bappenas.go.id/files/4413/5027/4149/ringkasan-eksekutifhandbook-2009060509__20090518105300__0.pdf
Bayoumi, T., Clerc, L., Claessens, S., Hamann, J., Hartmann, P., Jacome, L., Maddaloni, A., Noah, J.-F., Ntsama, N., De Nicolo, G., Stone, M., Tressel, T., & Ratnovski, L. (2010). What Caused the Global Financial Crisis?-Evidence on the Drivers of Financial IMF Working Paper Monetary and Capital Markets Department What Caused the Global Financial Crisis?-Evidence on the Drivers of Financial. IMF Working Papers, WP/10/265, 64. https://www.imf.org/external/pubs/ft/wp/2010/wp10265.pdf
Benazić, M. (2013). Testing the fisher effect in Croatia: An empirical investigation. Economic Research-Ekonomska Istrazivanja , 26, 83–102. https://doi.org/10.1080/1331677X.2013.11517641
Caporale, G. M., & Gil-Alaña, L. (2019). Testing the Fisher hypothesis in the G-7 countries using I(d) techniques. International Economics, 159(October 2018), 140–150. https://doi.org/10.1016/j.inteco.2019.07.002
Everaert, G. (2014). A panel analysis of the fisher effect with an unobserved I(1) world real interest rate. Economic Modelling, 41, 198–210. https://doi.org/10.1016/j.econmod.2014.05.005
İncekara, A., Demez, S., & Ustaoğlu, M. (2012). Validity of Fisher Effect for Turkish economy: Cointegration Analysis. Procedia - Social and Behavioral Sciences, 58, 396–405. https://doi.org/10.1016/j.sbspro.2012.09.1016
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. https://doi.org/10.1002/jae.616
R., Santos Alimi, Bernad O, M. (2001). Testing an augmented fisher hypothesis for a small open economy: The case of Finland. Journal of Macroeconomics, 23(4), 577–599. https://doi.org/10.1016/S0164-0704(01)00179-3
Yaya, K. (2015). Testing the Long-Run Fisher Effect in Selected African Countries: Evidence from ARDL Bounds Test. International Journal of Economics and Finance, 7(12), 168. https://doi.org/10.5539/ijef.v7n12p168
Zainal, N., Nassir, A. M., & Yahya, M. H. (2014). Fisher Effect: Evidence From Money Market in Malaysia. Journal of Social Science Studies, 1(2), 112. https://doi.org/10.5296/jsss.v1i2.4915

Downloads

Published

— Updated on 2020-08-31

How to Cite

Yuliati, L., Mukti, A. F., & Riniati. (2020). Autoregressive Distributed Lag (ARDL) approach for re-testing the Fisher effect in Indonesia. Jurnal Perspektif Pembiayaan Dan Pembangunan Daerah, 8(3), 209 - 218. https://doi.org/10.22437/ppd.v8i3.9200