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Is there a nonlinear long-run relation in the U.S. interest rate and inflation?

Author

Listed:
  • Hwa-taek Lee

    () (Korea Securities Depository)

  • Venus khim-sen Liew

    () (Universiti Malaysia Sarawak)

  • Gawon Yoon

    () (Kookmin University)

Abstract

Recent advances in nonlinear cointegration analysis find evidence for a nonlinear long-run relation between the U.S. interest rate and inflation. Employing the Breitung's (2001) rank tests for nonlinear cointegration, we find herein little evidence for cointegration in the U.S. data. We also provide simulation results regarding the performance of the rank tests for some plausible nonlinear models for the data.

Suggested Citation

  • Hwa-taek Lee & Venus khim-sen Liew & Gawon Yoon, 2013. "Is there a nonlinear long-run relation in the U.S. interest rate and inflation?," Economics Bulletin, AccessEcon, vol. 33(1), pages 104-112.
  • Handle: RePEc:ebl:ecbull:eb-12-00198
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2013/Volume33/EB-13-V33-I1-P10.pdf
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    References listed on IDEAS

    as
    1. In Choi & Pentti Saikkonen, 2004. "Testing linearity in cointegrating smooth transition regressions," Econometrics Journal, Royal Economic Society, vol. 7(2), pages 341-365, December.
    2. Qiying Wang & Peter C. B. Phillips, 2009. "Structural Nonparametric Cointegrating Regression," Econometrica, Econometric Society, vol. 77(6), pages 1901-1948, November.
    3. Dimitris K. Christopoulos & Miguel A. Leãn-Ledesma, 2007. "A Long-Run Non-Linear Approach to the Fisher Effect," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 543-559, March.
    4. Saikkonen, Pentti & Choi, In, 2004. "Cointegrating Smooth Transition Regressions," Econometric Theory, Cambridge University Press, vol. 20(02), pages 301-340, April.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    (Nonlinear) cointegration; Rank tests; Interest rate; Inflation;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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