Title:
TESTING THE VALIDITY OF FISHER HYPOTHESIS IN NIGERIA: AN ARDL COINTEGRATION APPROACH

Authors:
Yusuf Shamsuddeen Nadabo, Niger

Abstract:

This study investigates the validity of the Fisher hypothesis which postulates that there is a positive relationship between nominal interest rates and inflation rates while leaving real interest rate affected in the long run. It applies the Autoregressive Distributed Lag (ARDL) cointegration approach on annual time series data from 1986-2020. The results reveal the presence of partial of  Fisher effect both in the short run and long run. The study conclude that Fisher hypothesis is partially valid in Nigeria. The policy implication of the results is the reliance by the monetary authorities on the use of the lending rate, which is a derivative of monetary policy rate, by the monetary authorities, to ensure low and stable inflation (price stability) in Nigeria is unlikely to produce the desired result. The paper recommends the use of appropriate measures (monetary and fiscal) aimed at reducing the prevailing high lending and inflation rates so as to promote investment, productivity; hence long run economic growth.