THE RELATIONSHIP BETWEEN INFLATION RATES AND INTEREST RATES IN IVORY COAST

Economic growth in developing nations like Ivory Coast is often hindered by unstable macroeconomic conditions, particularly the complex interplay between inflation and interest rates. This study's objective is to examine the validity of Irving Fisher's Hypothesis in Ivory Coast by analyzing the relationship between inflation and interest rates from 2000 to 2023. Using a quantitative research design, we employ secondary data from the Central Bank of West African States and the World Bank, and analyze it using econometric methods including unit root tests, cointegration analysis, and Augmented Duckey Fuller (ADF)Test, Phillip and Perron(PP)Test. The descriptive analysis reveals significant fluctuations in both inflation and interest rates over the study period. Unit root tests confirmed that inflation, GDP, and the exchange rate were stationary at the first difference, while interest rates were stationary at their level. The findings indicate that while a long-run relationship exists, the full Fisher effect does not hold true, as inflation's coefficient is negative, suggesting that interest rates do not adequately adjust to changes in inflation. It is recommended that policymakers in Ivory Coast should prioritize strengthening inflation management and ensure interest rates are properly adjusted to maintain positive real interest rates, thereby promoting financial sector stability.