A Kalman Filter Approach To Fisher Effect- Evidence From Nigeria

This paper investigates evidence of a Fisher effect in Nigeria by employing quarterly CPI inflation and  Nominal interest rates data. For a more robust result we conducted integration and cointegration tests in  order to examine time-series properties of the variables. Using Co-integration and Kalman filter  methodologies, the study did not find evidence of a full Fisher effect from 1961:1-2009:4. This result indicates that nominal interest rates do not respond one-for-one to changes in inflation rates in the long  run despite the presence of positive relationship among the variables. Our stud…