AN EXPERIMENTAL TEST OF THE IRP, PPP AND FISHER THEOREMS

This experimental study provides an attempt to investigate whether at the micro level subjective interest rates are consistent with well-est ablished economic theories such as the Interest-Rate-Parity (IRP) theo rem, the Purchasing-Power-Parity (PPP) theorem and the Fisher effect. The empirical analysis indicates that although these hypotheses are no t verified at the micro level of individual subjects, the empirical re sults lend some support for the existence of somewhat weaker relations hips. The regression results of the theoretical relationships underlyi ng these hypotheses demonstrate that the ordinary-least-squares (OLS) coefficients carry the correct sign and are statistically different fr om zero. However, they are not equal to their theoretical counterparts . These results imply that the exact theoretical relationships underly ing the IRP, PPP and the Fisher theorems are not confirmed at the micr o level of individual subjects.