An I(2) cointegration analysis of small-country import price determination
AbstractThis paper develops a procedure for testing hypotheses on the full set of cointegration parameters of the I(2) model. It applies this procedure to the analysis of small-country import price determination, extending the standard empirical framework to allow for variables integrated of order two. The empirical analysis of Danish data for 1975--1995 yields a fully specified long-run structure of the I(2) model in terms of stationary pricing-to-market and inventory relations, a nominal second-order stochastic trend embodied in equal proportions in domestic and foreign price levels, and a real first-order trend driving the relative prices and the real interest rate. Copyright Royal Economic Society, 2003
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Bibliographic InfoArticle provided by Royal Economic Society in its journal The Econometrics Journal.
Volume (Year): 6 (2003)
Issue (Month): 1 (06)
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- Omtzigt Pieter & Paruolo Paolo, 2002.
Economics and Quantitative Methods
qf0203, Department of Economics, University of Insubria.
- Francesca DI IORIO & Stefano FACHIN & Riccardo LUCCHETTI, 2013. "Can you do the wrong thing and still be right? Hypothesis Testing in I(2) and near-I(2) cointegrated VARs," Working Papers 395, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
- Juselius, Katarina, 2014.
"Testing for near I(2) trends when the signal to noise ratio is small,"
Economics Discussion Papers
2014-8, Kiel Institute for the World Economy.
- Katarina Juselius, 2013. "Testing for Near I (2) Trends When the Signal to Noise Ratio is Small," Discussion Papers 14-01, University of Copenhagen. Department of Economics.
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