Advanced Search
MyIDEAS: Login to save this paper or follow this series

Testing hypotheses in an I(2) model with applications to the persistent long swings in the Dmk/$ rate

Contents:

Author Info

  • Søren Johansen
  • Katarina Juselius
  • Roman Frydberg
  • Michael Goldberg

    ()
    (School of Economics and Management, University of Aarhus, Denmark and CREATES)

Abstract

This paper discusses a number of likelihood ratio tests on long-run relations and common trends in the I(2) model and provide new results on the test of overidentifying restrictions on beta’xt and the asymptotic variance for the stochas- tic trends parameters, alpha 1: How to specify deterministic components in the I(2) model is discussed at some length. Model specification and tests are illustrated with an empirical analysis of long and persistent swings in the foreign exchange market between Germany and USA. The data analyzed consist of nominal exchange rates, relative prices, US in.ation rate, two long-term interest rates and two short-term interest rates over the 1975-1999 period. One important aim of the paper is to demonstrate that by structuring the data with the help of the I(2) model one can achieve a better understanding of the empirical regularities underlying the persistent swings in nominal exchange rates, typical in periods of floating exchange rates.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: ftp://ftp.econ.au.dk/creates/rp/08/rp08_03.pdf
Download Restriction: no

Bibliographic Info

Paper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2008-03.

as in new window
Length: 33
Date of creation: 15 Jan 2008
Date of revision:
Handle: RePEc:aah:create:2008-03

Contact details of provider:
Web page: http://www.econ.au.dk/afn/

Related research

Keywords: PPP puzzle; Forward premium puzzle; cointegrated VAR; likelihood inference;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. repec:cup:etheor:v:23:y:2007:i:04:p:615-637 is not listed on IDEAS
  2. Clara Jørgensen & Hans Christian Kongsted & Anders Rahbek, 1996. "Trend-Stationarity in the I(2) Cointegration Model," Discussion Papers 96-12, University of Copenhagen. Department of Economics.
  3. Rudiger Dornbusch and Jeffrey Frankel., 1988. "The Flexible Exchange Rate System: Experience and Alternatives," Economics Working Papers, University of California at Berkeley 8868, University of California at Berkeley.
  4. Heino Bohn Nielsen, 2004. "Cointegration analysis in the presence of outliers," Econometrics Journal, Royal Economic Society, vol. 7(1), pages 249-271, 06.
  5. Johansen, Søren, 1992. "A Representation of Vector Autoregressive Processes Integrated of Order 2," Econometric Theory, Cambridge University Press, vol. 8(02), pages 188-202, June.
  6. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198774501, October.
  7. Nielsen, Heino Bohn & Rahbek, Anders, 2007. "The Likelihood Ratio Test For Cointegration Ranks In The I(2) Model," Econometric Theory, Cambridge University Press, vol. 23(04), pages 615-637, August.
  8. Kongsted, Hans Christian, 2005. "Testing the nominal-to-real transformation," Journal of Econometrics, Elsevier, vol. 124(2), pages 205-225, February.
  9. Henrik Hansen & Søren Johansen, 1999. "Some tests for parameter constancy in cointegrated VAR-models," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 306-333.
  10. Paruolo, Paolo, 2002. "Asymptotic Inference On The Moving Average Impact Matrix In Cointegrated I (2) Var Systems," Econometric Theory, Cambridge University Press, vol. 18(03), pages 673-690, June.
  11. Paruolo, Paolo, 2000. "Asymptotic Efficiency Of The Two Stage Estimator In I (2) Systems," Econometric Theory, Cambridge University Press, vol. 16(04), pages 524-550, August.
  12. Nielsen, Bent & Rahbek, Anders, 2000. " Similarity Issues in Cointegration Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(1), pages 5-22, February.
  13. Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 203-233.
  14. Frédérique Bec & Anders Rahbek, 2004. "Vector equilibrium correction models with non-linear discontinuous adjustments," Econometrics Journal, Royal Economic Society, vol. 7(2), pages 628-651, December.
  15. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 84(6), pages 1161-76, December.
  16. Boswijk, H. Peter, 2000. "Mixed Normality And Ancillarity In I(2) Systems," Econometric Theory, Cambridge University Press, vol. 16(06), pages 878-904, December.
  17. Paruolo, Paolo & Rahbek, Anders, 1999. "Weak exogeneity in I(2) VAR systems," Journal of Econometrics, Elsevier, vol. 93(2), pages 281-308, December.
  18. Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199285679, October.
  19. Luca Fanelli & Emanuele Bacchiocchi, 2005. "Testing the purchasing power parity through I(2) cointegration techniques," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 20(6), pages 749-770.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Jusélius, Katarina & Ordóñez, Javier, 2008. "Wage, Price and Unemployment Dynamics in the Spanish Transition to EMU Membership," Economics Discussion Papers 2008-20, Kiel Institute for the World Economy.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:aah:create:2008-03. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.