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Alternative estimators of cointegrating parameters in models with nonstationary data: an application to US export demand

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  • James J. Forest
  • Paul Turner

Abstract

This article presents Monte Carlo simulations which compare the empirical performance of two alternative single equation estimators of the equilibrium parameters in a dynamic relationship. The estimators considered are Stock and Watson's Dynamic Ordinary Least Squares (DOLS) estimator and Bewley's transformation of the general autoregressive distributed lag model. The results indicate that the Bewley transformation produces a lower mean-square error as well as superior serial correlation properties even with lower truncation lags for the lagged variables included in the estimation equation. An application is then provided which examines the nature of the equilibrium relationship between aggregate US exports, world trade and the US real exchange rate. This confirms that estimation of the equilibrium parameters of this relationship by the Bewley transformation produces results which are superior to estimation by DOLS.

Suggested Citation

  • James J. Forest & Paul Turner, 2013. "Alternative estimators of cointegrating parameters in models with nonstationary data: an application to US export demand," Applied Economics, Taylor & Francis Journals, vol. 45(5), pages 629-636, February.
    • Handle: RePEc:taf:applec:45:y:2013:i:5:p:629-636
    DOI: 10.1080/00036846.2011.608647
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    Cited by:

    1. Holmes, Mark J. & Shen, Xin, 2013. "A note on the average propensity to consume, wealth and threshold adjustment," Economic Modelling, Elsevier, vol. 35(C), pages 309-313.
    2. Duc Hong Vo & Thang Cong Nguyen & Ngoc Phu Tran & Anh The Vo, 2019. "What Factors Affect Income Inequality and Economic Growth in Middle-Income Countries?," JRFM, MDPI, vol. 12(1), pages 1-12, March.
    3. Owusu Benjamin, 2021. "Fiscal Sustainability Hypothesis Test in Central and Eastern Europe: A Panel Data Perspective," Central European Economic Journal, Sciendo, vol. 8(55), pages 285-312, January.
    4. Jonathan Hambur & Lynne Cockerell & Christopher Potter & Penelope Smith & Michelle Wright, 2015. "Modelling the Australian Dollar," RBA Research Discussion Papers rdp2015-12, Reserve Bank of Australia.

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