Near unit root and the relationship between inflation and interest rates: A reexamination of the Fisher effect

2001 ◽  
Vol 26 (2) ◽  
pp. 357-366 ◽  
Author(s):  
Markku Lanne
Keyword(s):  
Interest Rates ◽  
Unit Root ◽  
Fisher Effect ◽  
Near Unit Root ◽  
The Relationship

scholarly journals An Empirical Evidence of International Fisher Effect in Bangladesh with India and China: A Time-Series Approach

2019 ◽  
Author(s):  
Md. Mahmudul Alam ◽  
Kazi Ashraful Alam ◽  
Anisuzzaman Shuvo
Keyword(s):  
Time Series ◽  
Exchange Rates ◽  
Interest Rates ◽  
Empirical Evidence ◽  
Fisher Effect ◽  
Nominal Interest Rates ◽  
Trading Partners ◽  
Time Series Approach ◽  
The Relationship ◽  
Casual Relationship

This paper is an attempt to examine the empirical evidence of International Fisher Effect (IFE) between Bangladesh and its two other major trading partners, China and India. The IFE uses interest rate differentials to explain why exchange rates change over time. A time series approach is considered to trace the relationship between nominal interest rates and exchange rates in these countries. The estimated value, by applying OLS, is used to determine the casual relationship between interest rates and exchange rates for quarterly data from 4th Quarter, 1995 to the 2nd Quarter, 2008. The empirical results suggest that there is a little correlation between exchange rates and interest rates differential for Bangladesh with China and Bangladesh with India, and the relationship between the variables is also not noteworthy for Bangladesh. Further, the trends advocate that the forecasting of exchange rates with the hypothesis of IFE is not realistic for these countries.

scholarly journals High Persistence and Nonlinear Behavior in Financial Variables: A More Powerful Unit Root Testing in the ESTAR Framework

Mathematics ◽  
2021 ◽  
Vol 9 (20) ◽  
pp. 2534
Author(s):  
Tolga Omay ◽  
Aysegul Corakci ◽  
Esra Hasdemir
Keyword(s):  
Interest Rates ◽  
Unit Root ◽  
Nuisance Parameter ◽  
Unit Root Test ◽  
Information Loss ◽  
Smooth Transition ◽  
Unit Root Testing ◽  
Fourier Function ◽  
Near Unit Root ◽  
Model Linearization

In this study, we consider the hybrid nonlinear features of the Exponential Smooth Transition Autoregressive-Fractional Fourier Function (ESTAR-FFF) form unit root test. As is well known, when developing a unit root test for the ESTAR model, linearization is performed by the Taylor approximation, and thereby the nuisance parameter problem is eliminated. Although this linearization process leads to a certain amount of information loss in the unit root testing equation, it also causes the resulting test to be more accessible and consistent. The method that we propose here contributes to the literature in three important ways. First, it reduces the information loss that arises due to the Taylor expansion. Second, the research to date has tended to misinterpret the Fourier function used with the Kapetanios, Shin and Snell (2003) (KSS) unit root test and considers it to capture multiple smooth transition structural breaks. The simulation studies that we carry out in this study clearly show that the Fourier function only restores the Taylor residuals of the ESTAR type function rather than accounting forthe smooth structural break. Third, the new nonlinear unit root test developed in this paper has very strong power in the highly persistent near unit root environment that the financial data exhibit. The application of the Kapetanios Shin Snell- Fractional Fourier (KSS-FF) test to ex-post real interest rates data of 11 OECD countries for country-specific sample periods shows that the new test catches nonlinear stationarity in many more countries than the KSS test itself.

scholarly journals The Relationship between Inflation and Interest Rates in the UK: The Nonlinear ARDL Approach

2020 ◽  
Vol 9 (3) ◽  
pp. 77-86
Author(s):  
Ismet Gocer ◽  
Serdar Ongan
Keyword(s):  
Interest Rates ◽  
Fisher Effect ◽  
Nonlinear Ardl ◽  
Long Run ◽  
Inflation Rates ◽  
Ardl Approach ◽  
Nonlinear Ardl Model ◽  
The Uk ◽  
First Time ◽  
The Relationship

AbstractThis study reconsiders the Fisher effect for the UK from a different methodological perspective. To this aim, the nonlinear ARDL model recently developed by Shin et al. (2014), is applied over the periods of 1995M1-2008M9 and 2008M10-2018M1. This model decomposes the changes in original inflation series as two new series: increases and decreases in inflation rates. Hence, it enables us to examine the Fisher effect in terms of increases and decreases in inflation separately. The empirical findings support asymmetrically partial Fisher effects for the UK in the long-run only for the first period. Additionally, this study attempts to describe and introduce a different version of the partial effect concept for the first time for the UK.

scholarly journals Was the Gibson Paradox for real? A Wicksellian study of the relationship between interest rates and prices

2014 ◽  
Vol 21 (2) ◽  
pp. 139-163 ◽  
Author(s):  
Jagjit S. Chadha ◽  
Morris Perlman
Keyword(s):  
Interest Rates ◽  
Positive Relationship ◽  
Formal Model ◽  
Natural Rate ◽  
Market Rate ◽  
Long Run ◽  
Advanced Economies ◽  
The Uk ◽  
Gibson Paradox ◽  
The Relationship

We examine the relationship between prices and interest rates for seven advanced economies in the period up to 1913, emphasising the UK. There is a significant long-run positive relationship between prices and interest rates for the core commodity standard countries. Keynes ([1930] 1971) labelled this positive relationship the ‘Gibson Paradox’. A number of theories have been put forward as possible explanations of the paradox but they do not fit the long-run pattern of the relationship. We find that a formal model in the spirit of Wicksell (1907) and Keynes ([1930] 1971) offers an explanation for the paradox: where the need to stabilise the banking sector's reserve ratio, in the presence of an uncertain ‘natural’ rate, can lead to persistent deviations of the market rate of interest from its ‘natural’ level and consequently long-run swings in the price level.

scholarly journals Asymmetric Macroeconomic Shocks and Asset Price Behaviors in Selected African Countries

2021 ◽  
Vol 11 (2) ◽  
pp. 90
Author(s):  
Saliu Mojeed Olanrewaju ◽  
Ogunleye Edward Oladipo
Keyword(s):  
Real Estate ◽  
Interest Rates ◽  
Asset Prices ◽  
Asset Price ◽  
Panel Cointegration ◽  
African Countries ◽  
Vector Autoregressive ◽  
Macroeconomic Variables ◽  
Real Estate Prices ◽  
The Relationship

This study examines the relationship between Asset prices (Stock and Real estate prices) and Macroeconomic variables in four selected African countries. The study employs the Westerlund Error Correction Based Panel Cointegration test and Eight-variable Structural Vector Autoregressive model to examine the relationship between asset prices and macroeconomic variables. Findings from the study confirm that no long-run relationship exists between both Asset prices and macroeconomic variables. The study equally reveals that portfolio diversification benefits of both stock and real estate markets are more pronounced in the period of a boom than the recession period in Africa. The results also show that GDP growth rate shock exerts a significant impact on both asset prices during expansion and recession periods. The study reveals that foreign interest rates and World oil price shocks are better predictors of both stock and real estate prices during the crisis period than in the expansion period.

scholarly journals INTEREST RATES, FISHER EFFECT AND ECONOMIC DEVELOPMENT IN TURKEY, 1989-2011

2016 ◽  
Vol 25 (2) ◽  
pp. 95-100
Author(s):  
Selahattin GÜR?? ◽  
Burak GÜR?? ◽  
Turgut ÜN
Keyword(s):  
Economic Development ◽  
Interest Rates ◽  
Test Validity ◽  
Threshold Cointegration ◽  
Fisher Effect ◽  
Empirical Results ◽  
Distributed Lag ◽  
Leading Indicator ◽  
Nominal Interest Rates ◽  
Fisher Hypothesis

This paper investigates the validity of the Fisher Hypothesis in Turkey coveringthe period 2003 – 2012. To test validity of Fisher Hypothesis, this paper uses anAutoregressive Distributed Lag test for threshold cointegration recently introduced in theliterature by Li and Lee (2010). The empirical results which are obtained from this paperindicate that Fisher hypothesis is valid for Turkey, meaning nominal interest rates wouldbe an important leading indicator for inflation.

Sign in / Sign up

Export Citation Format

Share Document