Fisher hypothesis revisited - A fractional cointegration analysis

Kasman S., Kasman A., Turgutlu E.

EMERGING MARKETS FINANCE AND TRADE, cilt.42, sa.6, ss.59-76, 2006 (SSCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 42 Sayı: 6
  • Basım Tarihi: 2006
  • Doi Numarası: 10.2753/ree1540-496x420604
  • Dergi Adı: EMERGING MARKETS FINANCE AND TRADE
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus
  • Sayfa Sayıları: ss.59-76
  • Anahtar Kelimeler: Fisher hypothesis, fractional cointegration, interest rates, long memory, TIME-SERIES, INTEREST-RATES, UNIT-ROOT, INFLATION, TESTS, MODEL
  • Dokuz Eylül Üniversitesi Adresli: Evet

Özet

This paper investigates the validity of the Fisher hypothesis using data from thirty-three developed and developing countries. Conventional cointegration tests do not provide strong evidence for a relation between nominal interest rates and inflation. Therefore, we use fractional cointegration analysis to test the long-run relationship between the two variables. The results indicate that a long-run relation between nominal interest rates and inflation does not appear for most countries in the sample when the conventional cointegration test is employed. However fractional cointegration between the two variables is found for a large majority of countries, implying the validity of the Fisher hypothesis. The results also indicate that the equilibrium errors display long memory.