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Testing the Fisher Hypothesis in the G-7 Countries Using I(d) Techniques

Guglielmo Maria Caporale and Luis Gil-Alana ()

No 6482, CESifo Working Paper Series from CESifo Group Munich

Abstract: This paper revisits the Fisher hypothesis by estimating fractional integration and cointegration models that are more general than the standard ones based on the classical I(0)/I(1) dichotomy. Two sets of results are obtained under the alternative assumptions of white noise and Bloomfield (1973) autocorrelated errors respectively. The univariate analysis suggests than the differencing parameter is higher than 1 for most series in the former case, whilst the unit root null cannot be rejected for the majority of them in the latter case. The multivariate results imply that there exists a positive relationship, linking nominal interest rates to inflation; however, there is no evidence of the full adjustment of the former to the latter required by the Fisher hypothesis.

Keywords: Fisher effect; fractional integration; long memory; G7 countries (search for similar items in EconPapers)
JEL-codes: C22 C32 E43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
Date: 2017
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