This paper considers various models including univariate time series and the ones emerging from the Fisher effect and/or the term structure of interest rates for Australian inflation forecasting, and assesses their in-sample and out-of-sample forecast power properties. The CPI seroes, 90-days and 180-days Asutralian bank-accepted bill rates covering the sample period 1968Q1 to 1995Q4 were used in this study. Contrary to earlier findings, using the Gregory and Hansen (1996) test we document strong evidence supporting the Fisher effect in the presence of a structural break with the break-point being at 1980Q1.
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Paper provided by La Trobe - Department of Economics in its series Papers with number
97.23.