ABSTRACT
The international Fisher effect (IFE) is a theory in international finance that can be used to predict or estimate the movement in the bilateral exchange rate between any two currencies using nominal interest rate differentials. IFE states that the spot exchange rate between two currencies should move in the opposite direction with the interest rate differential between those countries. The aim of this study is to examine whether the IFE holds between Namibia and each of its five trading partners. In order to test for the direction of the parity, each of the five trading partners was considered as home countries and Namibia as the foreign country. The study used historic nominal interest rates and bilateral exchange rates for the period 2010 first quarter to f 2018 fourth quarter for Namibia, China, Netherland and India. However, data for the United Kingdom and the United States of America were only available for the first quarter of 2010 to second quarter of 2018 and first quarter of 2010 to second quarter of 2017 respectively. A regression analysis was employed to test the validity of the IFE between Namibia and the following countries: China, the United Kingdom, Netherland, the United States of America and India. The outcomes were mixed in both scenarios, where Namibia was the home country, results showed that the IFE does not hold. However, when Namibia was used as a foreign country, the IFE holds for the case of the United States of America versus Namibia even though the correlation was not one to one. The results also indicated that the IFE theory could not be relied upon to predict the changes in bilateral exchange rates for the chosen countries from 2010 to 2018.
KAMUTUSHI, A (2021). An Empirical Test Of The International Fisher Effect Between Namibia And Her Major Trade Partners. Afribary. Retrieved from https://afribary.com/works/an-empirical-test-of-the-international-fisher-effect-between-namibia-and-her-major-trade-partners
KAMUTUSHI, ALPHEUS "An Empirical Test Of The International Fisher Effect Between Namibia And Her Major Trade Partners" Afribary. Afribary, 21 Apr. 2021, https://afribary.com/works/an-empirical-test-of-the-international-fisher-effect-between-namibia-and-her-major-trade-partners. Accessed 24 Nov. 2024.
KAMUTUSHI, ALPHEUS . "An Empirical Test Of The International Fisher Effect Between Namibia And Her Major Trade Partners". Afribary, Afribary, 21 Apr. 2021. Web. 24 Nov. 2024. < https://afribary.com/works/an-empirical-test-of-the-international-fisher-effect-between-namibia-and-her-major-trade-partners >.
KAMUTUSHI, ALPHEUS . "An Empirical Test Of The International Fisher Effect Between Namibia And Her Major Trade Partners" Afribary (2021). Accessed November 24, 2024. https://afribary.com/works/an-empirical-test-of-the-international-fisher-effect-between-namibia-and-her-major-trade-partners