Trend breaks and the fisher hypothesis in canada and the United States
Authors: Frank J. Atkins; Milanda Chan
Source: Applied Economics, Volume 36, Number 17, September 20, 2004 , pp. 1907-1913(7)
Abstract:Using the sequential estimation methodology developed by Banerjee, Lumsdaine and Stock (Journal of Business and Economic Statistics, 10(3), 271-87, 1992), Zivot and Andrews (Journal of Business and Economic Statistics, 10(3), 251-70, 1992) and extended by Lumsdaine and Papell (Review of Economics and Statistics, 79(2), 212-18, 1997), empirical evidence is found consistent with the hypothesis that the 90-day Treasury Bill rate and the inflation rate in Canada and the US are stationary around a deterministic trend with two breaks. When the breaks are filtered out, the data is consistent with partial long-run adjustment of the nominal interest rate to an inflation shock, but not of the size predicted by the Fisher Effect.
Document Type: Research article
Publication date: 2004-09-01