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Can asymmetries account for the empirical failure of the Fisher effect in South Africa?

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  • Andrew Phiri

    ()
    (North West University (Potchefstroom Campus))

  • Peter Lusanga

    ()
    (North West University (Potchefstroom Campus))

Abstract

This paper investigates whether unobserved asymmetries can account for irregularities in the Fisher effect for the exclusive case of South Africa. This objective is attained by investigating unit roots within a threshold auto-regressive (TAR) models and estimating a threshold vector error correction (TVEC) models for the data. The empirical analysis depicts significant long-run Fisher effects whereas such effects are deficient with regards to the short-run. These results improve on those obtained in preceding studies for South Africa, in the sense of being closely emulated with the original hypothesis as presented by Fisher (1907).

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File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I3-P178.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 31 (2011)
Issue (Month): 3 ()
Pages: 1968-1979

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Handle: RePEc:ebl:ecbull:eb-11-00315

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Related research

Keywords: South Africa; Fisher effect; Inflation; Interest Rates; Threshold Co-integration;

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  1. Paul Alagidede & Theodore Panagiotidis, 2010. "Can Common Stocks Provide A Hedge Against Inflation? Evidence from African Countries," Koç University-TUSIAD Economic Research Forum Working Papers 1022, Koc University-TUSIAD Economic Research Forum.
  2. Bruce E. Hansen, 2000. "Sample Splitting and Threshold Estimation," Econometrica, Econometric Society, vol. 68(3), pages 575-604, May.
  3. Balke, Nathan S & Fomby, Thomas B, 1997. "Threshold Cointegration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 627-45, August.
  4. Shabbir Ahmad, 2010. "Fisher effect in nonlinear STAR framework: some evidence from Asia," Economics Bulletin, AccessEcon, vol. 30(4), pages 2558-2566.
  5. George Kapetanios & Yongcheol Shin, 2002. "Unit Root Tests in Three-Regime SETAR Models," Working Papers 465, Queen Mary, University of London, School of Economics and Finance.
  6. Óscar Bajo Rubio & Carmen Díaz Roldán & Vicente Esteve, 2004. "Is the Fisher Effect Nonlinear? Some Evidence for Spain, 1963-2002," Economic Working Papers at Centro de Estudios Andaluces E2004/05, Centro de Estudios Andaluces.
  7. Seo, Myunghwan, 2006. "Bootstrap testing for the null of no cointegration in a threshold vector error correction model," Journal of Econometrics, Elsevier, vol. 134(1), pages 129-150, September.
  8. William J. Crowder & Mark E. Wohar, 1999. "Are Tax Effects Important in the Long-Run Fisher Relationship? Evidence from the Municipal Bond Market," Journal of Finance, American Finance Association, vol. 54(1), pages 307-317, 02.
  9. Hansen, Bruce E. & Seo, Byeongseon, 2002. "Testing for two-regime threshold cointegration in vector error-correction models," Journal of Econometrics, Elsevier, vol. 110(2), pages 293-318, October.
  10. H.a. Mitchell-innes & M.j. Aziakpono & A.p. Faure, 2007. "Inflation Targeting And The Fisher Effect In South Africa: An Empirical Investigation," South African Journal of Economics, Economic Society of South Africa, vol. 75(4), pages 693-707, December.
  11. Million, Nicolas, 2004. "Central Bank's interventions and the Fisher hypothesis: a threshold cointegration investigation," Economic Modelling, Elsevier, vol. 21(6), pages 1051-1064, December.
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