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An Empirical Evidence of International Fisher Effect in Bangladesh with India and China: A Time-Series Approach
Elixir Online Journal: Elixir Finance (2011)
  • Md. Mahmudul Alam
  • Kazi Ashraful Alam
  • Anisuzzaman Shuvo
Abstract
This paper is an attempt to examine the empirical evidence of International Fisher Effect (IFE) between Bangladesh and its two other major trading partners, China and India. The IFE uses interest rate differentials to explain why exchange rates change over time. A time series approach is considered to trace the relationship between nominal interest rates and exchange rates in these countries. The estimated value, by applying OLS, is used to determine the casual relationship between interest rates and exchange rates for quarterly data from 4th Quarter, 1995 to the 2nd Quarter, 2008. The empirical results suggest that there is a little correlation between exchange rates and interest rates differential for Bangladesh with China and Bangladesh with India, and the relationship between the variables is also not noteworthy for Bangladesh. Further, the trends advocate that the forecasting of exchange rates with the hypothesis of IFE is not realistic for these countries.
Keywords
  • Purchasing Power Parity (PPP),
  • Exchange Rate,
  • Interest Rate,
  • International Fisher Effect (IFS),
  • Fisher Effect
Publication Date
2011
Citation Information
Alam, M.M., Alam, K.A., and Shuvo, A. 2011. An Empirical Evidence of International Fisher Effect in Bangladesh with India and China: A Time-Series Approach, Elixir Online Journal: Elixir Finance, Vol. 36, pp. 3078-3081. Available at .