Financial Analytics: Science and Experience

The Fisher effect in Russia

Vol. 8, Iss. 46, DECEMBER 2015

Received: 10 November 2015

Accepted: 25 November 2015

Available online: 15 December 2015

Subject Heading: Economic policy

JEL Classification: 

Pages: 12-27

Alekhin B.I. Russian State University for the Humanities, Moscow, Russian Federation

Importance The Fisher effect means an assumption that the nominal interest rate is a sum of the real interest rate and expected inflation. Researchers demonstrate an ongoing and high interest to empirically check the Fisher effect mostly due to an important role of money in the economy.
     Objectives The research presents an empirical verification of the Fisher hypothesis in the Russian market of bank loans and relies upon 59 observations starting from Q4 2000 up to Q2 2015.
     Methods I applied the econometric methodology encompassing the extended Dickey–Fuller test for the unit root, Engle–Granger test for co-integration, Error Correction Model and the Granger casualty test.
     Results I detected the co-integration of non-stationary nominal interest rates and inflation, and slowly recovering balance between them. The inflation influences nominal interest rates, while they have no effect on the inflation.
     Conclusions and Relevance The Russian market of bank loans experiences the incomplete Fisher effect with a very slow correction. The incomplete Fisher effect is beneficial for borrowers, rather than banks. The conclusions call for the market liberalization, competition development in the banking sector and further privatization of State banks and other firms with high public interest. It is extremely important to reduce the inflation.

Keywords: Fisher effect, co-integration, rate, bank loan


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