Journal of Undergraduate Research
Keywords
Fisher effect, fractional integration, ARFIMA, developed countries, interest rates
College
Family, Home, and Social Sciences
Department
Economics
Abstract
Abstract. In this paper we model inflation and the nominal interest rate as a fractionally integrated, autoregressive, moving average (ARFIMA) process in order to test the theoretical proposition that nominal interest rates move one for one with inflation, thus, leaving the real interest rates unchanged; i.e. the Fisher effect. Using the necessary integration conditions first derived by Fisher and Seater (1993) and extended to fractional orders by Jensen et al. (forthcoming), we test the Fisher effect hypothesis in eleven developed countries; Belgium, Canada, Denmark, France, Germany, Greece, Ireland, Japan, the Netherlands, the UK, and the US.
Recommended Citation
Jensen, Mark J. and Murdock, Scott G.
(2013)
"Testing the Fisher effect under fractional integration,"
Journal of Undergraduate Research: Vol. 2013:
Iss.
1, Article 169.
Available at:
https://scholarsarchive.byu.edu/jur/vol2013/iss1/169