Does the Fisher hypothesis hold for the G7? Evidence from the panel cointegration test

Özcan, Burcu; Arı, Ayşe

doi:10.1080/1331677x.2015.1041777

Cited by 14 publications

(5 citation statements)

References 40 publications

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“…The evidence is consistent with an earlier study by Mishkin (1992). Similarly, Ozcan and Ari (2015) investigated the G7 countries over the period from January 2000 to November 2012 by employing cointegration tests. The evidence indicates that the adjustment in nominal interest rates due to changes in inflation is below unity, suggesting the existence of a partial Fisher effect.…”

Section: Fisher Effect and Bond Price Changesupporting

confidence: 89%

Inflation, Equity Market Volatility, and Bond Prices: Evidence from G7 Countries

Chen,

Chiang,

Lin

2023

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This study examines the impacts of the US inflation rate on the bond prices of G7 countries across different maturities using inflation-induced equity market volatility (EMV) to better account for bond price determinants. The regression model, a GED-GARCH (1,1) procedure, is adopted to deal with the volatility clustering and fat tail features in bond return estimation. The testing results indicate that the inflation rate has a negative effect on bond returns across different maturities, although an exception occurs for longer maturities in Japan. Evidence shows that US inflation has a significant impact on bond returns for the non-US G7 countries. The negative effects from US inflation are more profound than those from the domestic market (expect in Japan). This study introduces the equity market volatility arising from inflation or the Fed’s interest rate change; this variable produces market volatility that has a positive effect on bond returns, offsetting part of the original negative effect from a rise in inflation.

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Section: Fisher Effect and Bond Price Changesupporting

confidence: 89%

Inflation, Equity Market Volatility, and Bond Prices: Evidence from G7 Countries

Chen,

Chiang,

Lin

2023

Risks

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“…There are several examples of the use of this unit root/co-integration approach, beginning with the seminal studies of Rose (1988) [4] and Mishkin (1992) [5], whose methodology was subsequently applied in the more recent studies of Crowder and Wohar (1999) [6], Koustas and Serletis (1999) [7], Rapach (2002) [8], Laatsch and Klein (2003) [9] and Rapach and Weber (2005) [10], amongst many others. Some recent studies opted to use the panel data unit root/co-integration approach, as is the case of Westerlund (2008) [11] and Ozcan and Ari (2015) [12].…”

Section: Introductionmentioning

confidence: 99%

Structural Breaks, Inflation and Interest Rates: Evidence from the G7 Countries

et al. 2017

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This study reconsiders the common unit root/co-integration approach to test for the Fisher effect for the economies of the G7 countries. We first show that nominal interest and inflation rates are better represented as I (0) variables. Later, we use the Bai-Perron procedure to show the existence of structural changes in the Fisher equation. After considering these breaks, we find very limited evidence of a total Fisher effect as the transmission coefficient of the expected inflation rates to nominal interest rates is very different than one.

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“…For instance, Clemente, Gadea, and Reyes (2017) and Ghazali and Ramlee (2003) find evidence against neutrality, while Su and Phillips (2004) and Lardic and Mignon (2003) results support the money neutrality hypothesis. Ozcan and Ari (2015) findings are in between, concluding for a partial effectiveness of monetary policies. Far from providing final results, we look at a small data set and assume a linear regression to relate the average nominal interest rate on treasury bills to the nationwide inflation rate plus a time trend, in a sample comprising annual data from 1990 to 2017 8 .…”

Section: The Residual Based Testmentioning

confidence: 90%

Cointegration tests at the quantiles

Furno

2020

Int. J Fin Econ

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A cointegration test for quantile regressions is proposed and implemented using Italian data. The test relies on auxiliary quantile regression to verify the stationarity of the residuals of the cointegrating equation. According to the problem under analysis, the cointegrating equation may or may not model a structural break, to verify cointegration with or without break. The existing test by Xiao, Journal of Econometrics (2009), 150, 248–260 is a fluctuation type test, which is closely related to Qu, Journal of Econometrics (2008), 146, 170–184 on structural break in quantile regressions. The link between the two tests makes unclear if the fluctuation test verifies cointegration, stability, or possibly cointegration and stability mixed together. Two real data case studies and a Monte Carlo experiment complete the analysis.

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Does the Fisher hypothesis hold for the G7? Evidence from the panel cointegration test

Cited by 14 publications

References 40 publications

Inflation, Equity Market Volatility, and Bond Prices: Evidence from G7 Countries

Inflation, Equity Market Volatility, and Bond Prices: Evidence from G7 Countries

Structural Breaks, Inflation and Interest Rates: Evidence from the G7 Countries

Cointegration tests at the quantiles

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