Panel cointegration tests of the Fisher effect
(2008) In Journal of Applied Econometrics 23(2). p.193-233- Abstract
- Most empirical evidence suggests that the Fisher effect, stating that inflation and nominal interest rates should cointegrate with a unit slope on inflation, does not hold, a finding at odds with many theoretical models. This paper argues that these results can be attributed in part to the low power of univariate tests, and that the use of panel data can generate more powerful tests. For this purpose, we propose two new panel cointegration tests that can be applied under very general conditions, and that are shown by simulation to be more powerful than other existing tests. These tests are applied to a panel of quarterly data covering 20 OECD countries between 1980 and 2004. The evidence suggest that the Fisher effect cannot be rejected... (More)
- Most empirical evidence suggests that the Fisher effect, stating that inflation and nominal interest rates should cointegrate with a unit slope on inflation, does not hold, a finding at odds with many theoretical models. This paper argues that these results can be attributed in part to the low power of univariate tests, and that the use of panel data can generate more powerful tests. For this purpose, we propose two new panel cointegration tests that can be applied under very general conditions, and that are shown by simulation to be more powerful than other existing tests. These tests are applied to a panel of quarterly data covering 20 OECD countries between 1980 and 2004. The evidence suggest that the Fisher effect cannot be rejected once the panel evidence on cointegration has been taken into account. Copyright (C) 2007 John Wiley & Sons, Ltd. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/1207224
- author
- Westerlund, Joakim LU
- organization
- publishing date
- 2008
- type
- Contribution to journal
- publication status
- published
- subject
- in
- Journal of Applied Econometrics
- volume
- 23
- issue
- 2
- pages
- 193 - 233
- publisher
- John Wiley & Sons Inc.
- external identifiers
-
- wos:000254774100003
- scopus:51449123402
- ISSN
- 0883-7252
- DOI
- 10.1002/jae.967
- language
- English
- LU publication?
- yes
- id
- 600d1808-7aa5-473e-9bd6-567d3fa72d19 (old id 1207224)
- date added to LUP
- 2016-04-01 11:49:23
- date last changed
- 2022-04-28 20:11:50
@article{600d1808-7aa5-473e-9bd6-567d3fa72d19,
abstract = {{Most empirical evidence suggests that the Fisher effect, stating that inflation and nominal interest rates should cointegrate with a unit slope on inflation, does not hold, a finding at odds with many theoretical models. This paper argues that these results can be attributed in part to the low power of univariate tests, and that the use of panel data can generate more powerful tests. For this purpose, we propose two new panel cointegration tests that can be applied under very general conditions, and that are shown by simulation to be more powerful than other existing tests. These tests are applied to a panel of quarterly data covering 20 OECD countries between 1980 and 2004. The evidence suggest that the Fisher effect cannot be rejected once the panel evidence on cointegration has been taken into account. Copyright (C) 2007 John Wiley & Sons, Ltd.}},
author = {{Westerlund, Joakim}},
issn = {{0883-7252}},
language = {{eng}},
number = {{2}},
pages = {{193--233}},
publisher = {{John Wiley & Sons Inc.}},
series = {{Journal of Applied Econometrics}},
title = {{Panel cointegration tests of the Fisher effect}},
url = {{http://dx.doi.org/10.1002/jae.967}},
doi = {{10.1002/jae.967}},
volume = {{23}},
year = {{2008}},
}