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Some Structural Hypotheses in a Multivariate Cointegration Analysis of the Purchasing Power Parity and the Uncovered Interest Parity for UK

Author

Listed:
  • Søren Johansen

    (Institute of Mathematical Statistics, University of Copenhagen)

  • Katarina Juselius

    (Institute of Economics, University of Copenhagen)

Abstract

This paper develops some new tests for structural hypotheses in the framework of a multivariate error correction model with Gausian errors. The tests are constructed by an analysis of the likelihood function and motivated by an empirical investigation of the PPP relation and the UIP relation for the United Kingdom. Three types of tests are discussed. First, the authors' consider the same linear restrictions on all cointegration relations, then they consider the hypothesis that certain relations are assumed to be cointegrating, and finally they formulate a general hypothesis that contains the previous ones. This hypothesis can be expressed by the conditions that some of the cointegrating relations are subject to given linear restrictions, while others are unconstrained.

Suggested Citation

  • Søren Johansen & Katarina Juselius, 1990. "Some Structural Hypotheses in a Multivariate Cointegration Analysis of the Purchasing Power Parity and the Uncovered Interest Parity for UK," Discussion Papers 90-05, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:9005
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    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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