Structural Breaks, Inflation and Interest Rates: Evidence for the G7 countries
AbstractThis paper challenges the commonly used unit root/cointegration approach for testing the Fisher effect for the economies of the G7 countries. We first prove that nominal interest and inflation rate can be better represented as being broken trend stationary variables. Later, we use the Bai-Perron procedure to show the existence of structural changes in the Fisher equation. When these characteristics are taken into account the Fisher hypothesis we can only offer evidence in favor of this hypothesis for the US, the French and the Japanese economies.
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Bibliographic InfoPaper provided by EconWPA in its series Econometrics with number 0401005.
Length: 30 pages
Date of creation: 15 Jan 2004
Date of revision:
Note: Type of Document - pdf; prepared on win98; pages: 30
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Unit Roots; Structural Breaks; Interest rates; Inflation; \ Fisher Effect;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-01-18 (All new papers)
- NEP-EEC-2004-01-18 (European Economics)
- NEP-FIN-2004-01-18 (Finance)
- NEP-MAC-2004-01-18 (Macroeconomics)
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- Maghyereh, A. & Al-Zoubi, H., 2006. "Does Fisher Effect Apply in Developing Countries: Evidence From a Nonlinear Cotrending Test applied to Argentina, Brazil, Malysia, Mexico, Korea and Turkey," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(2).
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