Fisher effect and real interest rate equalization in selected asian countries

This study investigated the validity of the Fisher effect and real interest rate parity with respect to China in the context of Asian countries (China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Thailand, India and Taiwan) by using long-term and short-term interest rat...

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Main Author:	Ling, Tai Hu
Format:	Thesis
Language:	English English
Published:	2008
Subjects:	HB535-551 Interest
Online Access:	https://eprints.ums.edu.my/id/eprint/38600/1/24%20PAGES.pdf https://eprints.ums.edu.my/id/eprint/38600/2/FULLTEXT.pdf
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id	my-ums-ep.38600
record_format	uketd_dc
spelling	my-ums-ep.386002024-05-02T08:46:29Z Fisher effect and real interest rate equalization in selected asian countries 2008 Ling, Tai Hu HB535-551 Interest This study investigated the validity of the Fisher effect and real interest rate parity with respect to China in the context of Asian countries (China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Thailand, India and Taiwan) by using long-term and short-term interest rates for the period spanning from quarter one of 2001 to quarter three of 2006. Univariate unit root tests and ARDL bounds test for cointegration were used in this study to examine both Fisher effect and real interest rate parity. All in all, this study showed that there was no cointegration relationship between short-term nominal interest rate and expected inflation for the case of Indonesia, Malaysia, the Philippines and China. It is shown that only Hong Kong and China exhibited evidence of cointegration relationship between long-term interest rates and expected inflation rates. In other words, Fisher effect holds for Hong Kong and China. Meanwhile, Indonesia, South Korea, Malaysia, the Philippines, Thailand and Taiwan did not exhibited evidence of cointegration relationship between long-term interest rates and expected inflation rates. This implied that Fisher effect did not hold for these countries. This study showed that there was no long-run relationship between the real interest rates for the case of Indonesia and Malaysia with respect to China real interest rate using short-term interest rates. So, real interest rate parity did not hold. It was shown that more evidence of long-run relationship between the real interest rates of Asian countries with respect to China can be observed for the long-term interest rates. The real interest rates for Indonesia and Taiwan exhibited evidence of long-run relationship with respect to China real interest rate. In other words, real interest rate parity holds for Indonesia and Taiwan. Meanwhile, Hong Kong, Malaysia, the Philippines and Thailand did not exhibited evidence of cointegration relationship. The real interest rate parity did not hold for these countries. Finally, a few policy implications have been highlighted in response to these findings. This information was useful for the central bank to adopt an appropriate monetary policy to control economic behavior. Besides, the banks should set efficient investment strategy in order to prevent unnecessary losses in capital investment. These findings will also benefited to the global investors who intend to do investment in the Asian region. 2008 Thesis https://eprints.ums.edu.my/id/eprint/38600/ https://eprints.ums.edu.my/id/eprint/38600/1/24%20PAGES.pdf text en public https://eprints.ums.edu.my/id/eprint/38600/2/FULLTEXT.pdf text en validuser masters Universiti Malaysia Sabah Sekolah Perniagaan dan Kewangan Antarabangsa Labuan
institution	Universiti Malaysia Sabah
collection	UMS Institutional Repository
language	English English
topic	HB535-551 Interest
spellingShingle	HB535-551 Interest Ling, Tai Hu Fisher effect and real interest rate equalization in selected asian countries
description	This study investigated the validity of the Fisher effect and real interest rate parity with respect to China in the context of Asian countries (China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Thailand, India and Taiwan) by using long-term and short-term interest rates for the period spanning from quarter one of 2001 to quarter three of 2006. Univariate unit root tests and ARDL bounds test for cointegration were used in this study to examine both Fisher effect and real interest rate parity. All in all, this study showed that there was no cointegration relationship between short-term nominal interest rate and expected inflation for the case of Indonesia, Malaysia, the Philippines and China. It is shown that only Hong Kong and China exhibited evidence of cointegration relationship between long-term interest rates and expected inflation rates. In other words, Fisher effect holds for Hong Kong and China. Meanwhile, Indonesia, South Korea, Malaysia, the Philippines, Thailand and Taiwan did not exhibited evidence of cointegration relationship between long-term interest rates and expected inflation rates. This implied that Fisher effect did not hold for these countries. This study showed that there was no long-run relationship between the real interest rates for the case of Indonesia and Malaysia with respect to China real interest rate using short-term interest rates. So, real interest rate parity did not hold. It was shown that more evidence of long-run relationship between the real interest rates of Asian countries with respect to China can be observed for the long-term interest rates. The real interest rates for Indonesia and Taiwan exhibited evidence of long-run relationship with respect to China real interest rate. In other words, real interest rate parity holds for Indonesia and Taiwan. Meanwhile, Hong Kong, Malaysia, the Philippines and Thailand did not exhibited evidence of cointegration relationship. The real interest rate parity did not hold for these countries. Finally, a few policy implications have been highlighted in response to these findings. This information was useful for the central bank to adopt an appropriate monetary policy to control economic behavior. Besides, the banks should set efficient investment strategy in order to prevent unnecessary losses in capital investment. These findings will also benefited to the global investors who intend to do investment in the Asian region.
format	Thesis
qualification_level	Master's degree
author	Ling, Tai Hu
author_facet	Ling, Tai Hu
author_sort	Ling, Tai Hu
title	Fisher effect and real interest rate equalization in selected asian countries
title_short	Fisher effect and real interest rate equalization in selected asian countries
title_full	Fisher effect and real interest rate equalization in selected asian countries
title_fullStr	Fisher effect and real interest rate equalization in selected asian countries
title_full_unstemmed	Fisher effect and real interest rate equalization in selected asian countries
title_sort	fisher effect and real interest rate equalization in selected asian countries
granting_institution	Universiti Malaysia Sabah
granting_department	Sekolah Perniagaan dan Kewangan Antarabangsa Labuan
publishDate	2008
url	https://eprints.ums.edu.my/id/eprint/38600/1/24%20PAGES.pdf https://eprints.ums.edu.my/id/eprint/38600/2/FULLTEXT.pdf
_version_	1804890330569375744

Fisher effect and real interest rate equalization in selected asian countries

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