Panel cointegration tests of the Fisher effect

Westerlund, Joakim 2008, Panel cointegration tests of the Fisher effect, Journal of applied econometrics, vol. 23, no. 2, pp. 193-233, doi: 10.1002/jae.967.

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Title Panel cointegration tests of the Fisher effect
Author(s) Westerlund, JoakimORCID iD for Westerlund, Joakim orcid.org/0000-0002-8030-5706
Journal name Journal of applied econometrics
Volume number 23
Issue number 2
Start page 193
End page 233
Total pages 41
Publisher Wiley
Place of publication London, Eng.
Publication date 2008-03
ISSN 0883-7252
1099-1255
Keyword(s) Social Sciences
Economics
Social Sciences, Mathematical Methods
Business & Economics
Mathematical Methods In Social Sciences
LONG-RUN RELATIONSHIP
REAL INTEREST-RATE
PURCHASING POWER PARITY
NOMINAL INTEREST-RATES
UNIT-ROOT
MULTICOUNTRY ANALYSIS
INFLATION
REGRESSIONS
HYPOTHESIS
INFERENCE
Summary Most empirical evidence suggests that the Fisher effect, stating that inflation and nominal interest rates should cointegrate with a unit slope on inflation, does not hold, a finding at odds with many theoretical models. This paper argues that these results can be attributed in part to the low power of univariate tests, and that the use of panel data can generate more powerful tests. For this purpose, we propose two new panel cointegration tests that can be applied under very general conditions, and that are shown by simulation to be more powerful than other existing tests. These tests are applied to a panel of quarterly data covering 20 OECD countries between 1980 and 2004. The evidence suggest that the Fisher effect cannot be rejected once the panel evidence on cointegration has been taken into account. Copyright © 2008 John Wiley & Sons, Ltd.
Language eng
DOI 10.1002/jae.967
Field of Research 150202 Financial Econometrics
Socio Economic Objective 919999 Economic Framework not elsewhere classified
HERDC Research category C1.1 Refereed article in a scholarly journal
Copyright notice ©2008, Wiley
Persistent URL http://hdl.handle.net/10536/DRO/DU:30078220

Document type: Journal Article
Collections: Faculty of Business and Law
Deakin Business School
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