This paper tests the validity of the Fisher hypothesis, which establishes a positive relation between interest rates and expected inflation, for the G7 countries and 45 developing economies. For this purpose, we estimate a version of the GARCH specification of the hypothesis for all countries included in the sample. We also test the augmented Fisher relation by including the inflation uncertainty in the equation. The simple Fisher relation holds in all G7 countries but in only 23 developing countries. There is a positive and statistically significant relationship between interest rates and inflation uncertainty for six of the G7 and 18 of the developing countries and this relationship is negative for seven developing countries.

This study investigates the asymmetric effects of monetary policy shocks on the macroeconomic variables of exchange rate, output and inflation for an emerging economy ‒ Turkey ‒ by using monthly data between 1990 and 2014. We employ the innovative nonlinear vector autoregressive model of Kilian and Vigfusson (2011), which allows us to observe the effect of different stances (tight or loose) and different sizes (small or large) of monetary policy actions. Our empirical evidence reveals that tight monetary policy, which, in this case, is captured with a positive shock to interest rate, decreases exchange rate, output and prices, as economic theory suggests. Loose monetary policy, which is captured with a negative shock to interest rate, has the opposite effect on these variables. However, the effects of loose monetary policy are weaker than the effects of tight monetary policy because loose monetary policy shocks are less effective than tight monetary policy shocks. Moreover, as the magnitude of a shock increases, the difference between the effects of tight and loose monetary policy policies also increases.

This paper assesses the effect of three major soccer teams' wins on the returns of the Istanbul Stock Exchange (ISE). We argue that the effect of soccer wins on ISE returns increases with the fanaticism of the teams' supporters. © 2009 Western Social Science Association

This study examines the effects of capital inflows on the macroeconomic performance in an emerging, small open economy--Turkey. Using monthly data from 1992:01 to 2001:06 and a recursive vector autoregression model, we find that positive innovations in capital inflows appreciate the domestic currency, and increase output and money supply, but decrease interest rates and prices in the short run. We also find that the exchange rate regime does not influence the effects of capital flows on macroeconomic performance. Implications of the findings for policymakers are analyzed.