Analysis of Nominal Interest Rate-General Price Level Relationship Within the Framework of Gibson Paradox

TANRIÖVER B., YAMAK N.

MALIYE DERGISI, no.168, pp.186-200, 2015 (ESCI) identifier

  • Publication Type: Article / Article
  • Volume: Issue: 168
  • Publication Date: 2015
  • Journal Name: MALIYE DERGISI
  • Journal Indexes: Emerging Sources Citation Index (ESCI), TR DİZİN (ULAKBİM)
  • Page Numbers: pp.186-200
  • Karadeniz Technical University Affiliated: No

Abstract

The purpose of this paper is to test Gibson paradox for the Turkish economy and to answer theoretical debate about the direction of long-term relationship. For this purpose we used consumer price index and twelve-month forward deposit interest rate for the period of 1990-2014. Bounds testing approach developed by Pesaran et al. (2001) was applied to test the paradox. The presence of Gibson paradox has been accepted and also the long-term relationship has been detected to be one-way from general price level to nominal interest rate as Fisher (1930), Shiller and Siegel (1977), Friedman and Schwartz (1982) proposed.