Abstract
This study examines the time series properties of inflation and interest rates variables using monthly data from 6 OECD countries covering the period 1972.1–1984.8. The analysis focuses on the hypotheses that real rates of interest are constant over time and that movements in nomial rates can be explained by inflation only. These hypotheses are tested by applying both formal and informal test procedures and by carrying out tests both in the time and in the frequency domain. On the whole, the empirical evidence is at variance with these hypotheses. Only in the case of the United States do the results lend some support for the existence of the Fisher relationship.
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I am indebted to Jouni Kokko for research assistance, to the Economic Research Council of the Nordic Countries for financial support, and to John Merrick and two anonymous referees for useful comments. An earlier draft of this paper was presented at the 13th annual meeting of the European Finance Association, in Dublin, August 28–30, 1986.
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Virén, M. Inflation and interest rates: Some time series evidence from 6 OECD countries. Empirical Economics 12, 51–66 (1987). https://doi.org/10.1007/BF01973003
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DOI: https://doi.org/10.1007/BF01973003