Time varying rank and time varying coefficients VECM model and Fisher Effect Mechanism Test

Time varying rank and time varying coefficients VECM model and Fisher Effect Mechanism Test


Author: Jin Chunyu,Lan Zhongting  Journal:The Journal of Quantitative & Technical Economics  Date:2017(6)

Keywords Fisher effect; VECM; time-varying co integration rank; singular value decomposition; Markov regime switching;

Abstract

Research objective: to test whether the fisher effect exists in our economy". Research methods: the Markoff system transformation structure is applied to the modeling of co integration rank. Considering the time-varying of co integration parameters, the VECM model with time-varying rank and time-varying coefficients is constructed, and the model parameters are estimated by Bayesian framework. The study found that: between January 1992 ~2016 year in March China's nominal interest rate and inflation rate variable coefficient VECM model and I (1) VAR model of variable coefficient of two zone system conversion data, between China's nominal interest rate and inflation rate mainly time-varying cointegration relationship. Estimates of the normalized cointegrating vector shows that the entire sample period of our existence "Fisher Effect" economic dominance; "new normal" period, there is no "Fisher Effect" in a dominant position; the Fisher Effect in China since July 2015 has become weak "". Research Innovation: the Markoff zone transformation structure is applied to the modeling of co integration ranks, and the VECM model with time-varying rank and time-varying coefficients is constructed. Research value: help to re understand the "Fisher Effect" puzzle".


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