Proceedings of the 2nd Economics & Finance Conference, Vienna

FISHER EFFECT IN AUSTRIA CAUSALITY APPROACH

SAMI TABAN, TAYFUR BAYAT, FERIT ÖNDER

Abstract:

In this study, we aim to investigate relationship between interest rate and consumer price index in Austria by using quarterly data belonging 1990:Q1 to 2013:Q4.period in the context of Fisher (1930) hypothesis. We employ linear unit root test and causality tests. according to linear Granger causality test, there is no causal relationship between the variables in Austria. So the time domain causality analyses imply that Fisher’s hypothesis is not valid in Austria. Forth, frequency domain causality test results imply bi-directional causality while the Fisher effect is valid in the short run. Also the causality runs from inflation rate to interest rate in the long run. At the end of analysis, results imply that Fisher effect is not validity for Austria in this period.

Keywords: Fisher Effect, Interest Rate, Inflation Rate, Causality

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