Saadet Kirbas Kasman () (Department of Economics, Faculty of Business, Dokuz Eylül University) Adnan Kasman () (Department of Economics, Faculty of Business, Dokuz Eylül University) Evrim Turgutlu () (Department of Economics, Faculty of Business, Dokuz Eylül University)
Abstract
This paper investigates the validity of the Fisher hypothesis using data from 33 developed and developing countries. Conventional cointegration tests do not provide strong evidence on the relationship 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 the long-run relationship between nominal interest rates and inflation do not exist for most countries in the sample when 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.
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Publisher Info
Paper provided by Dokuz Eylül University, Faculty of Business, Department of Economics in its series Discussion Paper Series with number
05/04.
Length: 27 pages Date of creation: 23 Nov 2005 Date of revision:
23 Nov 2005 Publication status: Forthcoming in Emerging Markets Trade and Finance Handle: RePEc:deu:dpaper:0504
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