DOES THE FISHER EFFECT APPLY IN AUSTRALIA

The Fisher hypothesis claims that changes in the expected inflation ra te will be fully reflected in nominal interest rates, and hence that r eal interest rates will remain constant over time. Evidence with Austr alian data from 1965 to 1990 suggests that the Fisher effect does not hold in the long-run. Analysis is performed using recently developed e conometric techniques which take account of possible nonstationarity i n the data. Attention is also given to the effects of financial market deregulation on interest rates.