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An Empirical Investigation of Structural Breaks in the Ex Ante Fisher Effect

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Author Info
Olekalns, N.

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Abstract

This paper investigates the relationship between expected inflation and the nominal interest rate using Australia data. Recently developed time series techniques are used that allow for estimation across different regimes where the timing and number of structural breaks are not known a priori. The results are consistent with the existence of significant struc- tural breaks in the relation between interest rates and inflation, with there being some evidence that these are associated with changes in taxation. After allowing for the structural breaks, it appears that interest rates fail to fully reflect anticipated inflation.

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File URL: http://www.economics.unimelb.edu.au/SITE/research/workingpapers/wp00_01/786.pdf
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Publisher Info
Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 786.

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Length: 26 pages
Date of creation: 2001
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Handle: RePEc:mlb:wpaper:786

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Related research
Keywords: INFLATION ; INTEREST RATE ; TIME SERIES;

Find related papers by JEL classification:
G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation

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  1. Malliaropulos, Dimitrios, 2000. "A note on nonstationarity, structural breaks, and the Fisher effect," Journal of Banking & Finance, Elsevier, vol. 24(5), pages 695-707, May. [Downloadable!] (restricted)
  2. Atkins, F J, 1989. "Co-integration, Error Correction and the Fisher Effect," Applied Economics, Taylor and Francis Journals, vol. 21(12), pages 1611-20, December.
  3. Zivot, Eric & Andrews, Donald W K, 1992. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 251-70, July.
    Other versions:
  4. Gregory, Allan W & Hansen, Bruce E, 1996. "Tests for Cointegration in Models with Regime and Trend Shifts," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 555-60, August.
  5. Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Keating, John W., 1990. "Identifying VAR models under rational expectations," Journal of Monetary Economics, Elsevier, vol. 25(3), pages 453-476, June. [Downloadable!] (restricted)
  7. Olekalns, Nilss, 1996. "Further Evidence on the Fisher Effect," Applied Economics, Taylor and Francis Journals, vol. 28(7), pages 851-56, July. [Downloadable!] (restricted)
  8. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
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  9. Inder, Brett & Silvapulle, Paramsothy, 1993. "Does the Fisher Effect Apply in Australia?," Applied Economics, Taylor and Francis Journals, vol. 25(6), pages 839-43, June.
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This page was last updated on 2009-11-23.

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