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The Empirical Evaluation of Both the Internal and the International Fisher Effects for the Economy of Ukraine
Hrabynska I. V., Pylypenko O. Y.

Hrabynska, Iryna V., and Pylypenko, Oleksandr Yu. (2020) “The Empirical Evaluation of Both the Internal and the International Fisher Effects for the Economy of Ukraine.” Business Inform 12:279–285.
https://doi.org/10.32983/2222-4459-2020-12-279-285

Section: Economic and Mathematical Modeling

UDC 336.74+339.743

Abstract:
The article works out the essence of theoretical concepts of both the internal and the international effects named after I. Fisher. A review of professional publications gave reason to conclude that in the countries with higher levels of marketing of the economy, the strength of these effects is higher, which indicates a higher level of integration of their national financial markets into the global financial market. Based on the results of an econometric analysis, the authors have concluded about the relative weakness of the internal Fisher Effect and, consequently, on the need to use multifactor analysis in the study of the dynamics of the real interest rate in Ukraine. The empirical evaluation of the dependencies of monetary variables in the model describing the international Fisher Effect gave reason to conclude about the relative weakness of this effect, in particular for the currency pair of «dollar – hryvnia», and therefore, the differential of national interest rates is not sufficient basis for forecasting the dynamics of the foreign exchange rate. The article uses a number of statistical criteria and tests to examine the used econometric model, which gave grounds to conclude about its adequacy and statistical significance of variables. The authors elaborated the factors that have a restrictive impact on the international movement of capital and therefore can cause differences in the real interest rates, especially in emerging markets, namely: asymmetry of market information, psychological barriers, national legislative restrictions that quota the international capital flows, high transactional costs, peculiarities of the tax system, currency risks, political risks, etc. The thesis that the presence of weak Fisher Effects for the Ukrainian economy is one of the reasons for the low effectiveness of the interest channel of the transfer mechanism of monetary policy in Ukraine is substantiated.

Keywords: internal Fisher Effect, international Fisher Effect, inflation, method of the smallest squares, real interest rate, monetary policy, foreign exchange rate.

Fig.: 1. Tabl.: 3. Formulae: 9. Bibl.: 13.

Hrabynska Iryna V. – Candidate of Sciences (Economics), Professor, Professor, Department of Analytical Economy and International Economics, Ivan Franko National University of Lviv (1 Unіversytetska Str., Lvіv, 79001, Ukraine)
Email: [email protected]
Pylypenko Oleksandr Yu. – Student, Faculty of Economics, Ivan Franko National University of Lviv (1 Unіversytetska Str., Lvіv, 79001, Ukraine)
Email: [email protected]

List of references in article

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“Effective Federal Funds Rate (FEDFUNDS)“. Board of Governors of the Federal Reserve System (US). https://fred.stlouisfed.org/series/FEDFUNDS
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Fama, E. F. “Short-Term Interest Rates as Predictors of Inflation“. American Economic Review, vol. 65, no. 3 (1975): 269-282.
“International Fisher Effect (IFE)“. https://www.investopedia.com/terms/i/ife.asp#:~:text=The%20International%20Fisher%20Effect%20(IFE,their%20countries'%20nominal%20interest%20rates
Shapiro, A. C. Foundations of Multinational Financial Management. London: Prentice-Hall, Inc., 1998.
Solnik, B. International Investments. New York: Addison Wesley Longman, Inc., 2000.
Sundqvist, E. “An Empirical Investigation of the International Fisher Effect“. Bachelor's Thesis at Lurea University of Technology. 2002. https://www.diva-portal.org/smash/get/diva2:1029448/FULLTEXT01.pdfportal.org
Yugang, He. “A Study on the International Fisher Effect: An Investigation from South Korea and China“. Journal of Industrial Distribution & Business, vol. 9, no. 7 (2018): 33-42. DOI: 10.13106/ijidb.2018.vol9.no7.33

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