This paper examines the inverted Fisher hypothesis (FH) for five countries of the Common
Wealth of Independent States – Armenia, Georgia, Kazakhstan, Kyrgyzstan and Moldova
– using quarterly data on three-month Treasury bills interest rates and consumer prices
over the period 1995:01-2010:02. Results based on regression analysis are strongly
supportive of the inverted FH in all cases, except for Kazakhstan. The regression estimates
of the coefficient on inflation rate are not only correctly significantly signed in all cases but
are also very close to unity. The results show that the proposition of a oneto-one
proportionality between real interest and inflation rates cannot be rejected in all cases. One
important implication that emerges from these results is that Treasury bills markets in the
CIS countries are unlikely to provide any hedge against inflation. Another important
implication is that monetary policy cannot be conducted effectively to contain inflation by
reducing nominal interest rates.
JEL Codes: E43, E430
Key Words: Fisher effect, T-bills
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