Record Details

Asymmetric Analysis between Nominal Interest Rate and Inflation: A Case of Pakistan

Euro-Asian Journal of Economics and Finance

View Archive Info
 
 
Field Value
 
Title Asymmetric Analysis between Nominal Interest Rate and Inflation: A Case of Pakistan
 
Creator Hussain, Umer
Hina, Hafsa
 
Subject Inflation, Interest rate, Threshold Cointegration
 
Description The present study tries to analyze a two-regime vector error-correction model (VECM) along a single cointegrating vector by assuming threshold effect in the error-correction term advanced by Hansen and Seo (2002). Through Hansen linearity test (1990), nonlinearity has been detected in inflation rate series. Hansen and Seo (2002) test of threshold cointegration specified the nonlinear long run relationship between inflation rate and nominal interest rate (discount rate) and provided different error correction term for more and less persistent regimes. In order to extract maximum likelihood estimates in the model the Hansen and Seo (2002) algorithm has been applied between discount rate and inflation rate in Pakistan for covering the period from 1981-q1-2012q4. The linear and nonlinear estimates are yielded by algorithm of Hansen and Seo (2002) along critical values are used for the sake of testing threshold effects. The LM statistics of the test through bootstrap p-values are presented graphically, threshold effect in error correction term and the density bootstrap p-values also presented. In all phenomenon’s, the linear cointegration null hypothesis has been rejected against the alternative hypothesis of threshold cointegration
 
Publisher Academy of Business & Scientific Research
 
Date 2015-10-09
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://absronline.org/journals/index.php/eajef/article/view/556
 
Source Euro-Asian Journal of Economics and Finance; Vol 3 No 4 (2015): October; 240-252
2310-4929
2310-0184
 
Language eng
 
Relation http://absronline.org/journals/index.php/eajef/article/view/556/577
 
Rights Copyright (c) 2015 Euro-Asian Journal of Economics and Finance