For Pakistan

1. Fisher Effect

1) Check the money market rate (one year government security) of US$ and your currency in year 2014 and 2015. Make comparison.

2) Find the inflation rates of US and your country in year 2014 and 2015. Make comparison.

3) Use the above information to test Fisher Effect for both year 2014 and year 2015.

Note: Fisher Effect explains relationship between normal interest rate, real interest rate and

expected inflation. 1 + i$ = (1 + $ ) E(1 + $)