Non-linear co-integration between nominal interest rates and inflation: An examination of the fisher hypothesis for asian countries

Global Economic Review

Volumn 38, Issue 2, 2009, Pages 143-159

  Nusair, Salah A ^a  

^a GULF UNIVERSITY FOR SCIENCE AND TECHNOLOGY   (Kuwait)

Author keywords

Co integration; Fisher effect; Non linearity

Indexed keywords

EID: 77950776273     PISSN: 1226508X     EISSN: 17443873     Source Type: Journal    
DOI: 10.1080/12265080902891446     Document Type: Article

References (49)

1. References
2. Aksoy, Y., Orphanides, A., Small, D., Wieland, V. and Wilcox, D. (2006) A quantitative exploration of the opportunistic approach to disinflation, Journal of Monetary Economics, 53(8), pp. 1877-1893.
3. Balke, N. and Fomby, T. (1997) Threshold cointegration, International Economic Review, 38(3), pp. 627-645.
4. Bierens, H. (2000) Nonparametric nonlinear cotrending analysis, with an application to interest and inflation in the United States, Journal of Business and Economic Statistics, 18(3), pp. 323-337.
5. Caner, M. and Hansen, B. (2001) Threshold autoregression with a unit root, Econometrica, 69(6), pp. 1555-1596.
6. Cavoli, T. and Rajan, R. (2006) Inflation targeting arrangements in Asia: Exploring the role of the exchange rate, SCAPE Working Paper Series, Paper No. 2006/03 (Singapore: Singapore Center for Applied and Policy Economics).
7. Choi, C.-Y. and Moh, Y.-K. (2007) How useful are tests for unit-root in distinguishing unit-root processes from stationary but non-linear processes?, Econometrics Journal, 10(1), pp. 82-112.
8. Chow, H. and Kim, Y. (2006) Does greater exchange rate flexibility affect interest rates in post-crisis Asia?, Journal of Asian Economics, 17(3), pp. 478-493.
9. Christopoulos, D. and Leon-Ledesma, M. (2007) A long-run non-linear approach to the Fisher effect, Journal of Money, Credit and Banking, 39(2-3), pp. 543-559.
10. Coakley, J. and Fuertes, A. (2002) Asymmetric dynamics in UK real interest rates, Applied Financial Economics, 12(6), pp. 379-387.
11. Cooray, A. (2003) The Fisher effect: A survey, The Singapore Economic Review, 48(2), pp. 135-150.
12. Crowder, W. and Hoffman, D. (1996) The long-run relationship between nominal interest rates and inflation: The Fisher equation revisited, Journal of Money, Credit, and Banking, 28(1), pp. 102-118.
13. Crowder, W. and Wohar, M. (1999) Are tax effects important in the long-run Fisher relationship? Evidence from the municipal bond market, Journal of Finance, 54(1), pp. 307-317.
14. Enders, W. and Granger, C. (1998) Unit-root tests and asymmetric adjustment with an example using the term structure of the interest rates, Journal of Business and Economic Statistics, 16(3), pp. 304-311.
15. Engle, R. and Granger, C. (1987) Cointegration and error correction: Representation, estimation, and testing, Econometrica, 55(2), pp. 251-276.
16. Fisher, I. (1930) The Theory of Interest (New York: Macmillan).
17. Garcia, R. and Perron, P. (1996) An analysis of the real interest rate under regime shifts, The Review of Economics and Statistics, 78(1), pp. 111-125.
18. Goldberg, L., Lothian, J. and Okunev, J. (2003) Has international financial integration increased?, Open Economies Review, 14(3), pp. 299-317.
19. Granger, C. and Terasvirta, T. (1993) Modeling Nonlinear Economic Relationships (Oxford: Oxford University Press).
20. Gregory, A. and Hansen, B. (1996) Residual-based tests for cointegration in models with regime shifts, Journal of Econometrics, 70(1), pp. 99-126.
21. Gregory, A., Nason, J. and Watt, D. (1994) Testing for structural breaks in cointegrated relationships, Journal of Econometrics, 71(1), pp. 321-341.
22. Kapetanios, G., Shin, Y. and Snell, A. (2003) Testing for a unit root in the nonlinear STAR framework, Journal of Econometrics, 112(2), pp. 359-379.
23. Lanne, M. (2006) Nonlinear dynamics of interest rates and inflation, Journal of Applied Econometrics, 21(8), pp. 1157-1168.
24. MacDonald, R. and Murphy, P. (1989) Testing for the long-run relationship between nominal interest rates and inflations using cointegration techniques, Applied Economics, 21(4), pp. 439-447.
25. MacKinnon, J. (1991) Critical values for cointegration tests, in: R. F. Engle and C. W. J. Granger (Eds.) Long-run Economic Relationships: Readings in Cointegration, pp. 267-276 (Oxford: Oxford University Press).
26. Maki, D. (2005) Asymmetric adjustment of the equilibrium relationship between the nominal interest rate and inflation rate, Economics Bulletin, 3(9), pp. 1-8.
27. Million, N. (2004) Central bank's interventions and the Fisher hypothesis: A threshold cointegration investigation, Economic Modeling, 21(6), pp. 1051-1064.
28. Mishkin, F. (1992) Is the Fisher effect for real? A reexamination of the relationship between inflation and interest rates, Journal of Monetary Economics, 30(2), pp. 195-215.
29. Mishkin, F. (2000) Inflation targeting in emerging-market countries, The American Economic Review, 90(2), pp. 105-109.
30. Ng, S. and Peron, P. (2001) Lag length selection and the construction of unit root test with good size and power, Econometrica, 69(6), pp. 1519-1554.
31. Nusair, S. (2008) Testing for the Fisher hypothesis under regime shifts: An application to Asian countries, International Economic Journal, 22(2), pp. 273-284.
32. Orphanides, A. and Wilcox, D. (2002) The opportunistic approach to disinflation, International Finance, 5(1), pp. 47-71.
33. Payne, J. and Ewing, B. (1997) Evidence from lesser developed countries on the Fisher hypothesis: A cointegration analysis, Applied Economics Letters, 4(11), pp. 683-687.
34. Perron, P. (1989) The great crash, the oil price shock, and the unit root hypothesis, Econometrica, 57(6), pp. 1361-1401.
35. Pippenger, M. and Goering, G. (1993) A note on the empirical power of unit root tests under threshold processes, Oxford Bulletin of Economics and Statistics, 55(4), pp. 473-481.
36. Ramsey, J. and Rothman, P. (1996) Time irreversibility and business cycle asymmetry, Journal of Money, Credit and Banking, 28(1), pp. 1-21.
37. Rapach, D. and Weber, C. (2004) Are real interest rates really stationary? New evidence from tests with good size and power, Journal of Macroeconomics, 26(3), pp. 409-430.
38. Rose, A. (1988) Is real interest rate stable?, The Journal of Finance, 43(5), pp. 1095-1112.
39. Scaling, E. (1999) The non-linear Phillips curve and inflation forecast targeting, Working Paper (London: Bank of England).
40. Tai-Hu, L., Liew, V. and Wafa, S. (2007) Fisher hypothesis: East Asian evidence from panel unit root tests, MPRA Paper No. 5432 (Munich: Munich Personal RePEc Archive).
41. Taylor, M., Peel, D. and Sarno, L. (2001) Nonlinear mean-reversion in real exchange rates: Toward a solution to the purchasing power parity puzzles, International Economic Review, 42(4), pp. 1015-1042.
42. Taylor, M. and Sarno, L. (1998) The behavior of real exchange rates during the Post-Bretton Woods period, Journal of International Economics, 46(2), pp. 281-312.
43. Taylor, M. and Sarno, L. (2002) Real exchange rate dynamics in transition economies: A nonlinear analysis, Studies in Nonlinear Dynamics and Econometrics, 5(3), pp. 153-177.
44. Terasvirta, T. (1994) Specification, estimation, and evaluation of smooth transition autoregressive models, Journal of American Statistic Association, 89, pp. 212-281.
45. Terasvirta, T. and Anderson, H. (1992) Characterizing nonlinearities in business cycles using smooth transition autoregressive models, Journal of Applied Econometrics, 7, pp. S119-S136.
46. Wallace, M. and Warner, J. (1993) The Fisher effect and the term structure of interest rates: Tests of cointegration, Review of Economics and Statistics, 75(2), pp. 320-324.
47. Walsh, C. (1987) Three questions concerning nominal and real interest rates, Federal Reserve Bank of San Francisco, 4(Fall), pp. 5-19.
48. Weidmann, J. (1997) New hope for the Fisher effect? A reexamination using threshold cointegration, Sonderforschungsbereich 303 Discussion Paper B-385 (Bonn: University of Bonn).
49. Zivot, E. and Andrews, D. (1992) Further evidence on the great crash, the oil-price shock, and the unit root hypothesis, Journal of Business and Economic Statistics, 10(3), pp. 251-270.