Has the Euro Increased International Price Elasticities?
AbstractThis paper analyzes the role of common data problems when identifying structural breaks in small samples. Most notably, we survey small sample properties of the most commonly applied endogenous break tests developed by Brown, Durbin, and Evans (1975) and Zeileis (2004), Nyblom (1989) and Hansen (1992), and Andrews, Lee, and Ploberger (1996). Power and size properties are derived using Monte Carlo simulations. Results emphasize that mostly the CUSUM type tests are aﬀected by the presence of heteroscedasticity, whereas the individual parameter Nyblom test and AvgLM test are proved to be highly robust. However, each test is signiﬁcantly aﬀected by leptokurtosis. Contrarily to other tests, where skewness is far more problematic than kurtosis, it has no additional eﬀect for any of the endogenous break tests we analyze. Concerning overall robustness the Nyblom test performs best, while being almost on par to more recently developed tests in terms of power.
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Bibliographic InfoPaper provided by Halle Institute for Economic Research in its series IWH Discussion Papers with number 18.
Date of creation: Sep 2010
Date of revision:
European Integration; introduction of the Euro; import price elasticity; panel data; Kalman-filter; structural vector autoregression;
Other versions of this item:
- Oliver Holtemöller & Götz Zeddies, 2013. "Has the Euro increased international price elasticities?," Empirica, Springer, vol. 40(1), pages 197-214, February.
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F15 - International Economics - - Trade - - - Economic Integration
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
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- Erkel-Rousse, H. & Mirza, D., 2000.
"Import Price-Elasticities : Reconsidering the Evidence,"
Papiers d'Economie MathÃÂ©matique et Applications
2000.52, UniversitÃ© PanthÃ©on-Sorbonne (Paris 1).
- Hélène Erkel-Rousse & Daniel Mirza, 2002. "Import price elasticities: reconsidering the evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 35(2), pages 282-306, May.
- Helene Erkel-Rousse & Daniel Mirza, 2000. "Import Price-Elastcities: Reconsidering the Evidence," Econometric Society World Congress 2000 Contributed Papers 0909, Econometric Society.
- Salvador Gil-Pareja & Simon Sosvilla-Rivero, 2007.
"Price convergence in the European car market,"
Taylor and Francis Journals, vol. 40(2), pages 241-250.
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