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BUSINESS VISION (Vol. 9)

business_vision

AN EMPIRICAL STUDY OF THE INTERNATIONAL FISHER EFFECT IN BRICS COUNTRIES

  • Author : Prof. Manas Pandey
  • Edition : January - December 2013
  • Pages  : 108
  • ISSN   : 0973-1369
  • Abstract : In this study the empirical evidence of International Fisher Effect is investigated among BRICS member countries and United State as the home country. The purpose of this paper is to describe the theory of the international fisher effect and test its empirical validity in the long run. The question asked for this paper is, if there is a tendency for nominal interest differential to offset exchange rate change? The international fisher effect states that the future exchange rate can be determined from the nominal interest differential. A regression analysis has been applied to monthly nominal interest differential and exchange rate change for five country pairs between the years 2008 to 2014, along with lags. The investigation country pairs are US- Brazil, US – Russia, US – India, US – China and US – South Africa. The regression teste whether nominal interest differentials are a good forecast for changes in the future spot rate of exchange rate for the tested time frame and respective country pair. In general the results of this study indicated that exchange rates movements and do not follow the International Fisher Effect theory and nominal interest rate differentials cannot completely offset the currency value changes among BRICS countries in the long run.

Dr. Manisha Bhatt

Assistant Professor

C. Z. Patel College of Business & Management, Near Vallabh Vidhyanagar, Anand, Gujarat, India.

Jayshree Mandaviya

Assistant Professor

Anand Commerce College, Anand, Gujarat, India.

 
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