An I(2) Cointegration Analysis of Price and Quantity Formation in Danish Manufactured Exports
AbstractThe long-run and short-run structure of the Danish manufacturing export sector is analyzed within a cointegrated vector autoregressive model. The price variables of the analysis can be characterized as integrated of second order, I(2), but long-run homogeneity seems to cancel the I(2)-trend allowing the analysis of a transformed data set to take place within the cointegrated I(1) framework. Two long-run relations are found and identified as a demand-relation for Danish exports and a polynomially cointegrated price relation. In the price formation a large weight to foreign prices and an effect from the rate of inflation to the steady-state markup are found. The latter effect is interpreted as an element of caution in the price setting in an inflationary environment. To characterize the short-run behavior of the Danish export-sector a structural representation of the model is developed
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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 01-01.
Length: 20 pages
Date of creation: Jan 2001
Date of revision:
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Cointegration; I(2); Export Pricing; Market-shares; Small Open Economy;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
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