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

2019 ◽  
Vol 12 (2) ◽  
pp. 293-304
Author(s):  
Serdar Ongan ◽  
Ismet Gocer
Keyword(s):  
Interest Rates ◽  
Linear Representation ◽  
Fisher Equation ◽  
Fisher Effect ◽  
Ardl Model ◽  
Content Type ◽  
Nonlinear Ardl ◽  
Inflation Rates ◽  
Nonlinear Ardl Model ◽  
The Usa

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.

scholarly journals Asymmetric Impacts of Inflation on the US Bond Rates and FED’s Pre-Emptive Policy

2020 ◽  
Vol 5 (2) ◽  
pp. 143-157
Author(s):  
İsmet Göçer ◽  
Serdar Ongan
Keyword(s):  
Monetary Policy ◽  
Inflation Rate ◽  
Lower Cost ◽  
Fisher Equation ◽  
Ardl Model ◽  
Nonlinear Ardl ◽  
Inflation Rates ◽  
Nonlinear Ardl Model ◽  
The Us ◽  
Asymmetric Impact

Abstract This study investigates the asymmetric impacts of changes in inflation rates on the US bond rates. This investigation is constructed on the Fisher Equation. To this end, the nonlinear ARDL model is applied. Empirical findings indicate that only the decreases (π− t ) in inflation rates affect bond rates. This asymmetric impact therefore shapes the FED’s monetary policy in terms of determining the bond rates at lower cost. When the inflation rate rises, the FED will know (in advance) that they do not need to increase the bond rates. This reminds us the FED’s former pre-emptive strike policy against inflation.

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

2020 ◽  
Vol 9 (3) ◽  
pp. 77-86
Author(s):  
Ismet Gocer ◽  
Serdar Ongan
Keyword(s):  
Interest Rates ◽  
Fisher Effect ◽  
Nonlinear Ardl ◽  
Long Run ◽  
Inflation Rates ◽  
Ardl Approach ◽  
Nonlinear Ardl Model ◽  
The Uk ◽  
First Time ◽  
The Relationship

AbstractThis 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.

Turkey looks to ride out financial assets volatility

2016 ◽  
Keyword(s):  
Interest Rates ◽  
Banking Sector ◽  
Investor Sentiment ◽  
Military Coup ◽  
Bond Markets ◽  
Financial Assets ◽  
Content Type ◽  
Inflation Rates ◽  
Government Bond Markets ◽  
Global Government

Significance The Central Bank is expected to keep its main interest rates on hold, despite the lira continuing to fall sharply against the dollar and headline and core inflation rates that are more than 2 percentage points above the TCMB's 5% target. The toxic combination of an escalation in the crackdown following the botched military coup in July and, crucially, a sharp deterioration in investor sentiment towards emerging markets (EMs) since Donald Trump's election as US president have put Turkish assets under renewed strain. Impacts EMs are currently on the sharp end of a fierce sell-off in global government bond markets. Investors are repositioning their portfolios in anticipation of more aggressive hikes in interest rates during a Trump presidency. The sell-off comes amid improving EM fundamentals, unlike the 'taper tantrum' after the Fed unexpectedly shrank asset purchases in 2013. Turkey's creditworthiness will continue to suffer after the botched military coup. Limiting the scope for a full-blown financial crisis is its banking sector, among the emerging world's best capitalised and most resilient.

Turkish-German Commodity Trade and Asymmetric J-Curve

2020 ◽  
Vol 66 (2) ◽  
pp. 93-129
Author(s):  
Mohsen Bahmani-Oskooee ◽  
Huseyin Karamelikli
Keyword(s):  
Trade Balance ◽  
Commodity Trade ◽  
Ardl Model ◽  
Currency Depreciation ◽  
Nonlinear Ardl ◽  
Long Run ◽  
J Curve ◽  
Nonlinear Ardl Model ◽  
Short Run ◽  
Turkish Lira

We consider the short-run and the long-run effects of the real Turkish Lira-Euro rate on the trade balance of each of the 64 industries that trade between Turkey and Germany. We find relatively more significant effects by estimating a nonlinear ARDL model for each industry. Indeed, the approach of separating currency depreciation from appreciation identified the five largest Turkish industries that engage in more than 50 % of the trade between these two countries and that benefitted from Turkish Lira depreciation against the Euro.

scholarly journals Brexit’s Protectionist Policy and Implications for the British Pound

2017 ◽  
Vol 8 (4) ◽  
pp. 7
Author(s):  
Lara Joy Dixon ◽  
Hoje Jo
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Inflation Rate ◽  
Purchase Power Parity ◽  
Spot Rate ◽  
Fisher Effect ◽  
Power Parity ◽  
Macroeconomic Variables ◽  
Inflation Rates

In this paper, we examine the association among the macroeconomic variables - interest rate, inflation rate, unemployment, and the expected spot rate of the British pound with respect to the Euro around the announcement of “Brexit”, June 2016, using the two international parity relationships, Purchase Power Parity (PPP) and International Fisher effect (IFE). We use the two international parity relationships to examine the significance of change in daily interest rates and monthly inflation rates on the change in actual daily spot rates. In addition, we postulate that the protectionist nature of Brexit policy has contributed to lowering U.K. unemployment and prompted wage growth, resulting in higher inflation rates. Our analysis, examining both the magnitude and directional deviation of the actual spot rate compared to the spot rate using the two parity relations, indicate that spot rates predicted based on the PPP and the IFE relations suggest the weakening of the British pound after the Brexit announcement. Furthermore, we find that U.K. unemployment has reduced due to the expanded monetary policy, consistent with the prediction of the Phillip’s curve.

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