A fractional cointegration analysis of Fisher hypothesis: evidence from Turkey


Kiran B.

QUALITY & QUANTITY, vol.47, no.2, pp.1077-1084, 2013 (Journal Indexed in SCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 47 Issue: 2
  • Publication Date: 2013
  • Doi Number: 10.1007/s11135-011-9584-0
  • Title of Journal : QUALITY & QUANTITY
  • Page Numbers: pp.1077-1084

Abstract

This paper examines the validity of Fisher hypothesis in Turkey over the period from 1990:01 through 2010:03 by using cointegration and fractional cointegration approaches. The findings from Engle and Granger cointegration test indicate that inflation and nominal interest rate series are cointegrated. Since the conventional cointegration tests do not provide strong evidence on the long run relationship, we also use fractional cointegration definition suggested by Cheung and Lai (J Bus Econ Stat 11:103-112, 1993) which requires only a mean reverting (d < 1) relationship between the series. The results from fractional cointegration tests based on GPH and Robinson methods show that inflation and nominal interest rate series are fractionally cointegrated. These findings support the validity of the Fisher hypothesis in Turkey.