No abstract

No abstract

New international evidence exists on the Fisher effect in the United States, the United Kingdom, Japan, Germany and Canada over the modern (post-March 1973) floating exchange rate experience. Some puzzling data has been observed which suggests that the Fisher effect appears to be strong only for particular sample periods. It has also been reported in the literature that the Fisher effect is more likely in the long run, and that it is not common across economic regimes. This study sheds some light on these controversial issues taking advantage of more powerful tests for unit roots and cointegration. The findings for the Fisher effect contrast with previous results, especially those of Mishkin. The empirical results appear to accord with historical observations on interest rate movements in the five countries. Some important results are as follows: (1) the Fisher effect is not robust to policy changes; (2) there is strong evidence of a long-run Fisher effect for the United States, Germany, and Japan, but little evidence for the United Kingdom and Canada; (3) the short-run Fisher effect is only detected in Germany.

No abstract

This study investigates whether the globalization of financial markets enhances the efficiency of national stock markets. To this end, we have developed a dynamic representation of cointegration which is consistent with hypothesis that stock prices reflect the efficient discounting of new information on market fundamentals and testes for market efficiency in five industrialized markets (the United States, Canada, Japan, the United Kingdom, and Germany) over the last two decades. Our empirical analysis indicates that the U.S. and Canadian stock markets obey the long-run equilibrium path implied by our dynamic cointegration model, but the Japanese, British, and German markets do not exhibit such characteristics. Thus, it can be claimed that the stock markets of the United States and Canada are informationally efficient, whereas those of Japan, the United Kingdom, and Germany are not. [G15, G14]