Abstract:

It is seen that the Fisher hypothesis, which tries to explain the relationship between the interest rate and the inflation rate, is examined in the empirical literature for many years. The study examines the validity of the Fisher hypothesis in Turkey using time series analysis methods. Unlike the literature, it is aimed to examine the subject with a broad perspective by using the average cost of funding (AOFM), loan and deposit interest rates at the same time. For this purpose, Engle and Granger cointegration analysis is performed on the data between 2011.01-2021.08 for Turkey. After finding a cointegrating relationship between the series, the validity of the hypothesis is examined by using Fully Modified Ordinary Least Squares (FMOLS) cointegration estimator. According to the FMOLS analysis estimation findings, it is seen that the inflation rate has a statistically significant effect on the interest rate, and this effect differs in loan and deposit rates, and is higher in loan rates. In general, it is concluded that the highest effect is in AOFM. In addition, Toda and Yamamoto causality analysis is also performed and the causality relations between the series are examined. According to the results of Toda and Yamamoto causality analysis, causality relationship is determined from inflation rate to various interest rates. It is found that this relationship is bidirectional in consumer loans and AOFM. In summary, empirical findings show that the Fisher hypothesis is supported in Turkey.

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