An analysis of inflation and interest rates. New panel unit root results in the presence of structural breaks

Costantini, Mauro; Lupi, Claudio

doi:10.1016/j.econlet.2006.11.016

Cited by 23 publications

(12 citation statements)

References 28 publications

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“…4 In order to explore this possibility, we have considered several subgroups of countries. We have taken all of the possible combinations of five and six countries, and the values of the CIPS* statistic always allows the rejection of the null hypothesis, the average p-value being lower than 0.01 Thus, this lack of evidence against the null hypothesis matches the results of Constantini and Lupi (2007) [40] and Chang (2007, 2008) [41,42], who reject the presence of a unit root in the inflation rate for different sample sizes of OECD countries using the LM (Lagrange Multiplier) tests proposed in Strazicich (2003, 2013) [43,44], which consider the presence of broken trends in the evolution of these variables. These statistics can also provide evidence against the unit root null hypothesis for the nominal interest rates, as is reflected in Gadea et al (2009) [45].…”

Section: Empirical Evidence From the G7 Countriessupporting

confidence: 60%

Structural Breaks, Inflation and Interest Rates: Evidence from the G7 Countries

et al. 2017

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This study reconsiders the common unit root/co-integration approach to test for the Fisher effect for the economies of the G7 countries. We first show that nominal interest and inflation rates are better represented as I (0) variables. Later, we use the Bai-Perron procedure to show the existence of structural changes in the Fisher equation. After considering these breaks, we find very limited evidence of a total Fisher effect as the transmission coefficient of the expected inflation rates to nominal interest rates is very different than one.

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Section: Empirical Evidence From the G7 Countriessupporting

confidence: 60%

Structural Breaks, Inflation and Interest Rates: Evidence from the G7 Countries

et al. 2017

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“…Other studies have investigated the stationarity properties of the inflation rate for OECD countries in presence of structural breaks using panel tests (see Costantini andLupi, 2007, Basher andWesterlund, 2008, among others). The inflation rates are computed as the rate of growth of the consumer price index (HCPI) using quarterly data from OECD Prices Indices (MEI) data-set.…”

Section: Resultsmentioning

confidence: 99%

Bootstrap innovational outlier unit root tests in dependent panels

Costantini

Gutierrez

2012

Economics Letters

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“…Earlier studies of the literature based on single time series unit root tests, such as the standard ADF test, cannot reject the null hypothesis of a unit root (see, e.g.,Hall, Anderson, and Granger 1992;Tzavalis and Wickens 1998). On the other hand, more recent studies based on panel data tests or Bayesian panel data methods tend to reject this hypothesis (see, e.g.,Costantini and Lupi 2007;Meligkotsidou, Tzavalis, and Vrontos 2010). Brought to you by | University of Iowa Libraries Authenticated Download Date | 5/30/15 4:26 PM…”

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confidence: 96%

Term spread regressions of the rational expectations hypothesis of the term structure allowing for risk premium effects

Argyropoulos

Tzavalis

2015

Studies in Nonlinear Dynamics &Amp; Econometrics

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This paper suggests a new empirical methodology of testing the predictions of the term spread between long and short-term interest rates about future changes of the former allowing for term premium effects, according to the rational expectations hypothesis of the term structure. To capture the effects of a time-varying term premium on the term spread, the paper relies on an empirically attractive affine Gaussian dynamic term structure model which assumes that the term structure of interest rates is spanned by three unobserved state variables. To retrieve accurate values of these variables from interest rates series, the paper suggests a new method which can overcome the effects of measurement (or pricing) errors inherent in these series on the estimates of the model. This method is assessed by a Monte Carlo study. Ignoring these errors will lead to biased estimates of term structure models. The empirical results of the paper provide support for the suggested term structure model. They show that this model can efficiently capture the time-varying term premium effects embodied in long-term interest rates, which can explain the failures of term spread to forecast future changes in long-term rates.Keywords: affine term structure model; principal components; rational expectations hypothesis of the term structure of interest rates; time-varying term premium. JEL classifications: G12; E43.

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An analysis of inflation and interest rates. New panel unit root results in the presence of structural breaks

Cited by 23 publications

References 28 publications

Structural Breaks, Inflation and Interest Rates: Evidence from the G7 Countries

Structural Breaks, Inflation and Interest Rates: Evidence from the G7 Countries

Bootstrap innovational outlier unit root tests in dependent panels

Term spread regressions of the rational expectations hypothesis of the term structure allowing for risk premium effects

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