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., A. (2019). The Relationship Threshold Inflation with Fisher Effects in Indonesia: An Investigation Using Bounds Test. KnE Social Sciences, 3(14), 53–68. https://doi.org/10.18502/kss.v3i14.4298

https://doi.org/10.18502/kss.v3i14.4298

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  • Mar 31, 2019

The Relationship Threshold Inflation with Fisher Effects in Indonesia: An Investigation Using Bounds Test

KnE Social Sciences / The First Economics, Law, Education and Humanities International Conference (The First ELEHIC) / Pages 53–68

Abstract

This study aims to examine the validity of the Fisher hypothesis and the threshold of inflation in Indonesia in the period 2000-2018. The difference with previous research is not to examine the long-term relationship of the variables studied, because previous research shows that the results are very sensitive to samples in selected countries, study periods and methodologies. Therefore, this study, unlike previous research, because the inflation threshold variable also determines in the Fisher hypothesis analysis. Besides that the difference with previous research in terms of methodology using Autoregressive Distributed Lag Method (ARDL), which is not bound whether the variable is stationary at I(0) or I(1). The results of the study found that the Fisher Hypothesis has a coefficient value of one in the long run. This finding means that inflation and the threshold of inflation do not affect the real sector and will be absorbed by nominal interest rates, then money is ’neutral’. Therefore the implications of this study are very important for determining this Fisher effect for the implications of monetary policy.


 


 


Keywords: Interest rate, inflation, fisher hypothesis. Monetary Policy, ARDL.

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