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On the Gibson Paradox

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  • Serletis, Apostolos
  • Zestos, George

Abstract

This paper uses recent developments in the theory of nonstationary regressors to investigate empirical relationships previously taken to support the Gibson paradox, using quarterly data over the 1957:1-1994:4 period on nominal interest rates and prices for eight European Union countries--Belgium, Denmark, England, France, Germany, Ireland, Italy, and The Netherlands. Using the methodology suggested by Kydland and Prescott, it is shown that the (relevant) cyclical nominal interest rate--price level contemporaneous correlations are weak, thereby punching a hole in the Gibson paradox. Evidence is also presented, based on the integration properties of the data, that standard Gibson paradox regressions are spurious. Copyright 1999 by Blackwell Publishing Ltd.

Suggested Citation

  • Serletis, Apostolos & Zestos, George, 1999. "On the Gibson Paradox," Review of International Economics, Wiley Blackwell, vol. 7(1), pages 117-125, February.
    • Handle: RePEc:bla:reviec:v:7:y:1999:i:1:p:117-25
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    Cited by:

    1. Seçkin Kabak & Tuðçe Dallý, 2023. "Gibson Paradox: Panel Data Analysis on ASEAN-T Countries," International Econometric Review (IER), Econometric Research Association, vol. 15(1), pages 12-27, March.
    2. Dr Ferda Halicioglou, 2004. "The Gibson Paradox: An Empirical Investigation for Turkey," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 111-120.
    3. Frank J. Atkins & Apostolos Serletis, 2003. "Bounds Tests of the Gibson Paradox and the Fisher Effect: Evidence from Low‐Frequency International Data," Manchester School, University of Manchester, vol. 71(6), pages 673-679, December.

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