Panopoulou, Ekaterini (2004) A Resolution of the Fisher Effect Puzzle: A Comparison of Estimators. UNSPECIFIED. (Unpublished)

Download (400kB)

Abstract

This paper attempts a resolutin of the Fisher effect puzzle in terms of estimator choice. Using both short-term and long-term interest rates for 14 OECD countries, we find ample evidence supporting the existence of a long-run Fisher effect in which interest rates move one-to-one with inflation. Our results suggest that the reason why the Fisher effect has not founf support internatinally lies on the estimation method. When the hypothesis of a unit coefficient relating interest rates to expected inflation is tested with the Autoregressive Distributed Lag (ADL) framework. Which is invariant to the integration properties of the data,the Fishereffect easily survives the empirical evidence. Similar, but less robust, results are reached on the grounds of the Pre-Whitened Fully Modified Leas Squares (PW-FMLS) or the Johansen's (JOH) estimators.

Item Type:	Other
Additional Information:	Department of Economics Working Paper Series N150/02/05
Keywords:	Cointegration Estimators; Fisher Effect; ADL; DOLS; Small-sample properties
Academic Unit:	Faculty of Social Sciences > Economics, Finance and Accounting
Item ID:	206
Depositing User:	Ms Sandra Doherty
Date Deposited:	28 Feb 2005
Refereed:	No
URI:
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

Repository Staff Only(login required)

Item control page

Downloads

Origin of downloads