Fractional Cointegration Analysis of Fisher Hypothesis in Nigeria
Keywords:Cointegration, Fractional cointegration, Fisher hypothesis, Inflation, Nominal Interest Rates
In this paper, we examined fractional cointegration analysis of fisher hypothesis in Nigeria. It analyzed the existence of fractional cointegration relationship in nominal interest rate, real interest rate and inflation, which is consistent with the Fisher hypothesis. A conventional cointegration tests was applied between nominal interest rate, real interest and inflation, showing partial effect of Fisher. The value of the fractional intergrated parameter d was estimated. The fractional difference and the fractional cointegration analysis was carried out. It indicates that, there were two long run equilibrium relationships in the variables, showing full Fisher effect. This showed that the long-run relationship between nominal interest rates and inflation did not exist for Nigeria in the sample when conventional cointegration test was employed. However, fractional cointegration between the two variables was found, implying the validity of the Fisher hypothesis.
Baillie, R.T.; Chung,C. and M.A. Tieslau (1996): Analysing Inflation by the Fractionally Integrated ARMA-GARCH Model. Journal of Applied Econometrics 11,23-40.
Burcu, K. (2013): A fractional cointegration analysis of Fisher hypothesis: evidence from Turkey. Quality & Quantity: International Journal of Methodology, vol. 47, issue 2, pages 1077-1084
Crowder, W.J. and D.L. Hoffman (1996): The Long-run relationship Between Nominal Interest Rates and Inflation: The Fisher Equation Revisited. Journal of Money, Credit and Banking 28, 102-118.
Dickey, D.A. and W.A. Fuller (1979): Distribution of the Estimators for Autoregressive Time Series with a Unit Root. Journal of the American Statistical Association 74, 427-431.
Eagle, R.F. and C.W.J. Granger (1987): â€œCointegration and Error Correction: Representation, Estimation and Testing.â€ Econometrica 55, 251-276.
Evans, M. and K. Lewis (1995): Do Expected Shifts in Inflation Affect Estimates of the Long-run Fisher Relation? Journal of Finance 50, 225-253.
Geweke, J. and S. Porter-Hudak (1983): The Estimation and Application of Long Menory Time Series Models. Journal of Time Series Analysis 4, 221-238.
Ghazali, N.A. and S. Ramlee (2003): A long memory test of long-run Fisher effect in the G7 countries. Applied Financial Economics 13, 763-769.
Granville, B. and S. Mallick (2004): Fisher hypothesis: UK evidence over a country. Applied Economics Letters 11, 87-90.
Hurvich, C.M.; Deo, R.S.and J. Brodsky (1998): The Mean Squared Error of Geweke and Porter-Hudakâ€™s Estimator of the Memory Parameter of a Long-memory Time Series. Journal of Time Series Analysis, 19, 19-46.
Johansen, S. (1988): Statistical Analysis of Cointegrated Vectors. Journal of Economic Dynamics and Control 12, 231-254.
Johnson, P.A. (2006): Is it really the Fisher effect?, Applied Economics Letters, 13, 201-203.
Kwiatkowski, D.; Phillips, P.; Schmidt, P. and Y. Shin (1992): Testing the Null Hypothesis of Stationary Against the Alternative of a Unit Root: How sure are you that Economic Time Series Have a Unit Root? Journal of Econometrics 54, 159-178.
Lardic, S. and V. Mignon (2003): Fractional Cointegration Between Nominal Interest Rates and Inflation: A Re-examination of the Fisher Relationship in the G7 Countries. Economics Bulletin 3, 1-10.
Mishkin, F. (1992): Is the Fisher Effect for Real? A Re-examination of the Relationship between Inflation and Interest Rates. Journal of Monetary Economics 30, 195-215.
Perron, P. and T. J. Vogelsang (1993): Erratum. Econometrica 61, 248-249.
Saadet, K., Adnan, K. and T. Evrim (2005): Fisher Hypothesis Revisited: A fractional cointegration analysis. Discussion Paper Series, 5; 4-11.
How to Cite
- Papers must be submitted on the understanding that they have not been published elsewhere (except in the form of an abstract or as part of a published lecture, review, or thesis) and are not currently under consideration by another journal published by any other publisher.
- It is also the authors responsibility to ensure that the articles emanating from a particular source are submitted with the necessary approval.
- The authors warrant that the paper is original and that he/she is the author of the paper, except for material that is clearly identified as to its original source, with permission notices from the copyright owners where required.
- The authors ensure that all the references carefully and they are accurate in the text as well as in the list of references (and vice versa).
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Attribution-NonCommercial 4.0 International that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).
- The journal/publisher is not responsible for subsequent uses of the work. It is the author's responsibility to bring an infringement action if so desired by the author.