Convergence and Cointegration
AbstractThis paper provides a new, uni¯ed, and °exible framework to measure and characterize convergence in prices. We formally de¯ne this notion and propose a model to represent a wide range of transition paths that converge to a common steady-state. Our framework enables the econometric measurement of such transi- tional behaviors and the development of testing procedures. Speci¯cally, we derive a statistical test to determine whether convergence exists and, if so, which type: as catching-up or steady-state. The application of this methodology to historic wheat prices results in a novel explanation of the convergence processes experienced during the 19th century.
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Bibliographic InfoPaper provided by Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales in its series Documentos del Instituto Complutense de Análisis Económico with number 2011-22.
Length: 25 pages
Date of creation: 2011
Date of revision:
Price convergence; cointegration; law of one price.;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- N70 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - General, International, or Comparative
- F15 - International Economics - - Trade - - - Economic Integration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-25 (All new papers)
- NEP-ECM-2011-06-25 (Econometrics)
- NEP-ETS-2011-06-25 (Econometric Time Series)
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