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Fully modified estimation with nearly integrated regressors

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  • Erik Hjalmarsson

Abstract

I show that the test procedure derived by Campbell and Yogo (2005, Journal of Financial Economics, forthcoming) for regressions with nearly integrated variables can be interpreted as the natural t-test resulting from a fully modified estimation with near-unit-root regressors. This clearly establishes the methods of Campbell and Yogo as an extension of previous unit-root results.

Suggested Citation

  • Erik Hjalmarsson, 2006. "Fully modified estimation with nearly integrated regressors," International Finance Discussion Papers 854, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgif:854
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    1. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2006. "Alternative Procedures for Estimating Vector Autoregressions Identified with Long-Run Restrictions," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 475-483, 04-05.
    2. Peter C. B. Phillips & Bruce E. Hansen, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," Review of Economic Studies, Oxford University Press, vol. 57(1), pages 99-125.
    3. Alan G. Ahearne & John Ammer & Brian M. Doyle & Linda S. Kole & Robert F. Martin, 2005. "Monetary Policy and House Prices: A Cross-Country Study," Working Papers Central Bank of Chile 344, Central Bank of Chile.
    4. Campbell, John Y. & Yogo, Motohiro, 2006. "Efficient tests of stock return predictability," Journal of Financial Economics, Elsevier, vol. 81(1), pages 27-60, July.
    5. Francis E. Warnock & Veronica C. Warnock, 2005. "International Capital Flows and U.S. Interest Rates," The Institute for International Integration Studies Discussion Paper Series iiisdp103, IIIS.
    6. Wongswan, Jon, 2009. "The response of global equity indexes to U.S. monetary policy announcements," Journal of International Money and Finance, Elsevier, vol. 28(2), pages 344-365, March.
    7. Mario Marazzi & Nathan Sheets & Robert J. Vigfusson & Jon Faust & Joseph E. Gagnon & Jaime R. Marquez & Robert F. Martin & Trevor A. Reeve & John H. Rogers, 2005. "Exchange rate pass-through to U.S. import prices: some new evidence," International Finance Discussion Papers 833, Board of Governors of the Federal Reserve System (U.S.).
    8. Berger, David W. & Chaboud, Alain P. & Chernenko, Sergey V. & Howorka, Edward & Wright, Jonathan H., 2008. "Order flow and exchange rate dynamics in electronic brokerage system data," Journal of International Economics, Elsevier, vol. 75(1), pages 93-109, May.
    9. Phillips, P C B, 1991. "Optimal Inference in Cointegrated Systems," Econometrica, Econometric Society, pages 283-306.
    10. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", pages 125-132.
    11. Cavanagh, Christopher L. & Elliott, Graham & Stock, James H., 1995. "Inference in Models with Nearly Integrated Regressors," Econometric Theory, Cambridge University Press, vol. 11(05), pages 1131-1147, October.
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    Cited by:

    1. Hjalmarsson, Erik, 2006. "Inference in Long-Horizon Regressions," International Finance Discussion Papers 853, Board of Governors of the Federal Reserve System (U.S.), revised Oct 2008.
    2. Meredith J. Beechey & Erik Hjalmarsson & Par Osterholm, 2008. "Testing the expectations hypothesis when interest rates are near integrated," International Finance Discussion Papers 953, Board of Governors of the Federal Reserve System (U.S.).
    3. Chen Yu-Chin & Rogoff Kenneth, 2012. "Are The Commodity Currencies An Exception To The Rule?," Global Journal of Economics (GJE), World Scientific Publishing Co. Pte. Ltd., pages 1-28.
    4. Beechey, Meredith & Hjalmarsson, Erik & sterholm, Pr, 2009. "Testing the expectations hypothesis when interest rates are near integrated," Journal of Banking & Finance, Elsevier, vol. 33(5), pages 934-943, May.
    5. repec:nbp:nbpbik:v:47:y:2016:i:6:p:435-462 is not listed on IDEAS

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    Keywords

    Regression analysis;

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