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Testing hypotheses in an I(2) model with piecewise linear trends. An analysis of the persistent long swings in the Dmk/$ rate

Listed author(s):
  • Johansen, Søren
  • Juselius, Katarina
  • Frydman, Roman
  • Goldberg, Michael

This paper discusses the I(2) model with breaks in the deterministic component and illustrates the model with an analysis of German and US prices, exchange rates, and interest rates in the period 1975-1999. It provides new results on the likelihood ratio test of overidentifying restrictions on the cointegrating relations when they contain piecewise linear trends. One important aim of the paper is to demonstrate that a structured I(2) analysis is useful for a better understanding of the empirical regularities underlying the persistent swings in nominal exchange rates, typical in periods of floating exchange rates.

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File URL: http://www.sciencedirect.com/science/article/pii/S0304-4076(10)00060-6
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Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 158 (2010)
Issue (Month): 1 (September)
Pages: 117-129

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Handle: RePEc:eee:econom:v:158:y:2010:i:1:p:117-129
Contact details of provider: Web page: http://www.elsevier.com/locate/jeconom

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  14. Boswijk, H. Peter, 2000. "Mixed Normality And Ancillarity In I(2) Systems," Econometric Theory, Cambridge University Press, vol. 16(06), pages 878-904, December.
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