Can Nominal Interest Rates Be Used as the Inflation Indicator of Our Country

Relying on Fisher Effect, some scholars suggest that nominal interest rates are the ideal indicator of inflation. However others advance their doubts and hold that with the change in inflation the real interest rates are not fixed, therefore the change in inflation is not necessarily reflected correspondingly in the change in nominal interest rates. The author holds that even if the relationship between nominal interest rates and inflation is not fixed, as long as the two series are cointegrated, the long-term equilibrium relationship between the two will exist and the change in inflation will be reflected proportionally in the change in nominal interest rates and the nominal interest rates are still the ideal indicator of inflation. The study shows that the nominal interest rates are fit to be the inflation indicator of our country.