Structural breaks, cointegration and the Fisher effect

Andreas Beyer (), William G. Dewald and Alfred Haug

No 1013, Working Paper Series from European Central Bank

Abstract: There is scant empirical support in the literature for the Fisher effect in the long run, though it is often assumed in theoretical models. We argue that a break in the cointegrating relation introduces a spurious unit root that leads to a rejection of cointegration. We applied new break tests and tested for nonlinearity in the cointegrating relation with post-war data for 15 countries. Our empirical results support cointegration, after accounting for breaks, and a linear Fisher relation in the long run. This is in contrast to several recent studies that found no support for linear cointegration. JEL Classification: E43, C32

Keywords: Fisher effect; linear and nonlinear cointegration; structural change (search for similar items in EconPapers)
Date: 2009-02
Note: 336354
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20091013

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