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I(2) Cointegration in Macroeconometric Modelling: Tourism Price and Inflation Dynamics

Author

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  • Sergej Gričar

    (Faculty of Business and Management Science, University of Novo Mesto, Na Loko 2, 8000 Novo Mesto, Slovenia)

  • Štefan Bojnec

    (Faculty of Management, University of Primorska, Izolska vrata 2, 6000 Koper, Slovenia)

  • Bjørnar Karlsen Kivedal

    (Faculty of Computer Sciences, Engineering and Economics, Østfold University College, P.O. Box 700, 1757 Halden, Norway)

Abstract

This study enhances macroeconometric modelling by utilising an I(2) cointegration framework to analyse the dynamic link between tourism prices and inflation in Slovenia and the Eurozone. Using monthly data from 2000 to 2017, we estimate cointegrated VAR models that capture long-run equilibria, short-run adjustments, and persistent deviations inherent in I(2) processes. The results reveal strong spillover effects from Slovenian tourism and input prices to Eurozone inflation and hospitality prices in the short run, while Eurozone-wide shocks dominate the long-run dynamics. By explicitly accounting for nonstationarity, structural breaks, and seasonal patterns, the I(2) model provides a more reliable framework than traditional I(1) -based approaches, which are often prone to misspecification when higher-order integration and persistent deviations are ignored. The findings contribute to macroeconometric theory by demonstrating the value of I(2) cointegration in modelling complex price systems and offer policy insights into inflation management and competitiveness in tourism-dependent economies.

Suggested Citation

  • Sergej Gričar & Štefan Bojnec & Bjørnar Karlsen Kivedal, 2026. "I(2) Cointegration in Macroeconometric Modelling: Tourism Price and Inflation Dynamics," Econometrics, MDPI, vol. 14(1), pages 1-15, January.
    • Handle: RePEc:gam:jecnmx:v:14:y:2026:i:1:p:2-:d:1832590
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