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Panel cointegration tests of the Fisher hypothesis

Westerlund, Joakim 2005, Panel cointegration tests of the Fisher hypothesis, Working Paper, pp. 1-1.

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Title Panel cointegration tests of the Fisher hypothesis
Author(s) Westerlund, Joakim
Journal name Working Paper
Start page 1
End page 1
Total pages 1
Publisher Lund University
Place of publication Lund, Sweden
Publication date 2005-01-26
Keyword(s) C12
C15
C32
C33
E40
Fisher Hypothesis
Residual-Based Panel Cointegration Test
Monte Carlo Simulation.
Summary Recent empirical studies suggest that the Fisher hypothesis, stating that inflation and nominal interest rates should cointegrate with a unit parameter on inflation, does not hold, a finding at odds with many theoretical models. This paper argues that these results can be explained in part by the low power inherent in univariate cointegration tests and that the use of panel data should generate more powerful tests. In doing so, we propose two new panel cointegration tests, which are shown by simulation to be more powerful than other existing tests. Applying these tests to a panel of monthly data covering the period 1980:1 to 1999:12 on 14 OECD countries, we find evidence supportive of the Fisher hypothesis.
Language eng
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 ©2006, Lund University
Persistent URL http://hdl.handle.net/10536/DRO/DU:30078234

Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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