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Title: Testing the Fisher hypothesis in the G-7 countries using I(d) techniques
Authors: Caporale, GM
Gil-Alana, L
Keywords: Fisher effect;fractional integration;long memory;G7 countries
Issue Date: 16-Jul-2019
Publisher: Elsevier B.V. on behalf of CEPII (Centre d'Etudes Prospectives et d'Informations Internationales), a center for research and expertise on the world economy.
Citation: Caporale, G.M. and Gil-Alaña, L. (2019) 'Testing the Fisher hypothesis in the G-7 countries using I(d) techniques', International Economics, 159, pp. 140 - 150. doi: 10.1016/j.inteco.2019.07.002.
Abstract: © 2019 The Authors. This paper revisits the Fisher hypothesis concerning the determination of real rates by estimating fractional integration and cointegration models for nominal interest rates and expected inflation in the G7 countries. Two sets of results are obtained under the alternative assumptions of white noise and Bloomfield (1973) autocorrelated errors respectively. The univariate analysis suggests that the differencing parameter is higher than 1 for most series in the former case, whilst the unit root null cannot be rejected for the majority of them in the latter case. The multivariate results imply that there exists a positive relationship, linking nominal interest rates to inflation; however, there is no evidence of the full adjustment of the former to the latter required by the Fisher hypothesis.
ISSN: 2110-7017
Appears in Collections:Dept of Economics and Finance Research Papers

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