IDEAS home Printed from https://ideas.repec.org/p/nva/unnvaa/wp01-2014.html
   My bibliography  Save this paper

Long memory in Angolan macroeconomic series: mean reversion versus explosive behaviour

Author

Listed:
  • Luis Alberiko Gil-Alaña

    () (Navarra Center for International Development)

  • Carlos Pestana Barros
  • Guglielmo Maria Caporale

Abstract

This study examines the time series behaviour of several Angolan macroeconomic variables, using monthly data from August 1996 to June 2011. The series are the inflation rate, M1, M2, the exchange rate at the beginning and the end of the period, and the monthly average exchange rate. In the first stage univariate fractional integration models are estimated in order to determine whether shocks to the variables have transitory or permanent effects. In the second stage fractional cointegration techniques are applied to test for the existence of long-run equilibrium relationships between the variables of interest. The results suggest a high degree of persistence in the individual series (that are not mean-reverting) and the existence of bivariate long-run cointegrating relationships between prices and money, and prices and nominal exchange rates.

Suggested Citation

  • Luis Alberiko Gil-Alaña & Carlos Pestana Barros & Guglielmo Maria Caporale, 2014. "Long memory in Angolan macroeconomic series: mean reversion versus explosive behaviour," NCID Working Papers 01/2014, Navarra Center for International Development, University of Navarra.
  • Handle: RePEc:nva:unnvaa:wp01-2014
    as

    Download full text from publisher

    File URL: http://ncid.unav.edu/download/file/fid/324
    Download Restriction: no

    File URL: http://onlinelibrary.wiley.com/doi/10.1111/1467-8268.12064/pdf
    File Function: Link to published text
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Sowell, Fallaw, 1992. "Maximum likelihood estimation of stationary univariate fractionally integrated time series models," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 165-188.
    2. Bos, Charles S. & Franses, Philip Hans & Ooms, Marius, 2002. "Inflation, forecast intervals and long memory regression models," International Journal of Forecasting, Elsevier, vol. 18(2), pages 243-264.
    3. Carlos Pestana Barros, 2012. "Productivity Assessment of African Seaports," African Development Review, African Development Bank, vol. 24(1), pages 67-78, March.
    4. Luis A. Gil-Alana, 2006. "Testing Seasonality in the Context of Fractionally Integrated Processes," Annals of Economics and Statistics, GENES, issue 81, pages 69-91.
    5. Marinucci, D & Robinson, Peter M., 2001. "Semiparametric fractional cointegration analysis," LSE Research Online Documents on Economics 2269, London School of Economics and Political Science, LSE Library.
    6. Guglielmo Maria Caporale & Luis A. Gil-Alana, 2005. "Fractional Cointegration And Aggregate Money Demand Functions," Manchester School, University of Manchester, vol. 73(6), pages 737-753, December.
    7. Phillips, P C B, 1991. "Optimal Inference in Cointegrated Systems," Econometrica, Econometric Society, vol. 59(2), pages 283-306, March.
    8. Hassler, Uwe & Wolters, Jurgen, 1995. "Long Memory in Inflation Rates: International Evidence," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 37-45, January.
    9. David K. Backus & Stanley E. Zin, 1993. "Long-memory inflation uncertainty: evidence from the term structure of interest rates," Proceedings, Federal Reserve Bank of Cleveland, pages 681-708.
    10. Robinson, Peter M. & Yajima, Yoshihiro, 2002. "Determination of cointegrating rank in fractional systems," Journal of Econometrics, Elsevier, vol. 106(2), pages 217-241, February.
    11. Philip Hans Franses & Marius Ooms & Charles S. Bos, 1999. "Long memory and level shifts: Re-analyzing inflation rates," Empirical Economics, Springer, vol. 24(3), pages 427-449.
    12. repec:adr:anecst:y:2006:i:81 is not listed on IDEAS
    13. Milton Friedman, 1971. "Correspondence of the Monetary Theory of Nominal Income with Experience," NBER Chapters,in: A Theoretical Framework for Monetary Analysis, pages 46-48 National Bureau of Economic Research, Inc.
    14. Gilles Dufrenot & Laurent Mathieu & Valerie Mignon & Anne Peguin-Feissolle, 2006. "Persistent misalignments of the European exchange rates: some evidence from non-linear cointegration," Applied Economics, Taylor & Francis Journals, vol. 38(2), pages 203-229.
    15. Carlos P. Barros & Luis A. Gil-Alana, 2013. "Inflation Forecasting in Angola: A Fractional Approach," African Development Review, African Development Bank, vol. 25(1), pages 91-104, March.
    16. Anthony, Myrvin & MacDonald, Ronald, 1999. "The width of the band and exchange rate mean-reversion: some further ERM-based results," Journal of International Money and Finance, Elsevier, vol. 18(3), pages 411-428.
    17. Michael F. Bleaney & Stephen J. Leybourne & Paul Mizen, 1999. "Mean Reversion of Real Exchange Rates in High-Inflation Countries," Southern Economic Journal, Southern Economic Association, vol. 65(4), pages 839-854, April.
    18. Robinson, P.M. & Henry, M., 1999. "Long And Short Memory Conditional Heteroskedasticity In Estimating The Memory Parameter Of Levels," Econometric Theory, Cambridge University Press, vol. 15(03), pages 299-336, June.
    19. Caporale, Guglielmo Maria & Gil-Alana, Luis A., 2004. "Fractional cointegration and real exchange rates," Review of Financial Economics, Elsevier, vol. 13(4), pages 327-340.
    20. Gil-Alana, L. A. & Robinson, P. M., 1997. "Testing of unit root and other nonstationary hypotheses in macroeconomic time series," Journal of Econometrics, Elsevier, vol. 80(2), pages 241-268, October.
    21. Luis A. Gil-Alana, 2008. "Fractional integration and structural breaks at unknown periods of time," Journal of Time Series Analysis, Wiley Blackwell, vol. 29(1), pages 163-185, January.
    22. Abadir, Karim M. & Distaso, Walter & Giraitis, Liudas, 2007. "Nonstationarity-extended local Whittle estimation," Journal of Econometrics, Elsevier, vol. 141(2), pages 1353-1384, December.
    23. Friedman, Milton, 1971. "A Monetary Theory of Nominal Income," Journal of Political Economy, University of Chicago Press, vol. 79(2), pages 323-337, March-Apr.
    24. Marinucci, D. & Robinson, P. M., 2001. "Semiparametric fractional cointegration analysis," Journal of Econometrics, Elsevier, vol. 105(1), pages 225-247, November.
    25. Baillie, Richard T & Chung, Ching-Fan & Tieslau, Margie A, 1996. "Analysing Inflation by the Fractionally Integrated ARFIMA-GARCH Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(1), pages 23-40, Jan.-Feb..
    26. D Marinucci & Peter M Robinson, 2001. "Semiparametric Fractional Cointegration Analysis," STICERD - Econometrics Paper Series 420, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    27. Christopher F. Baum & John T. Barkoulas & Mustafa Caglayan, 1999. "Persistence in International Inflation Rates," Southern Economic Journal, Southern Economic Association, vol. 65(4), pages 900-913, April.
    28. repec:adr:anecst:y:2006:i:81:p:03 is not listed on IDEAS
    29. Benbouziane, Mohamed & Benamar, Abdelhak, 2004. "The relationship between money and prices in the maghreb countries: a cointegration analysis," MPRA Paper 12741, University Library of Munich, Germany.
    30. Lo, Andrew W, 1991. "Long-Term Memory in Stock Market Prices," Econometrica, Econometric Society, vol. 59(5), pages 1279-1313, September.
    31. Luis A. Gil-Alana & S. G. Brian Henry, 2003. "Fractional Integration and the Dynamics of UK Unemployment," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(2), pages 221-239, May.
    32. Jose M. Campa & Holger C. Wolf, 1997. "Is Real Exchange Rate Mean Reversion Caused By Arbitrage?," NBER Working Papers 6162, National Bureau of Economic Research, Inc.
    33. Carlos Pestana Barros & Nicolas Peypoch, 2012. "Productivity assessment of African seaports with biased technological change," Transportation Planning and Technology, Taylor & Francis Journals, vol. 35(6), pages 663-675, May.
    34. Christopher F. Baum & John Barkoulas, 2006. "Long-memory forecasting of US monetary indices," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 25(4), pages 291-302.
    35. Granger, C. W. J., 1981. "Some properties of time series data and their use in econometric model specification," Journal of Econometrics, Elsevier, vol. 16(1), pages 121-130, May.
    36. Granger, Clive W J, 1986. "Developments in the Study of Cointegrated Economic Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 213-228, August.
    37. Guglielmo Caporale & Luis Gil-Alana, 2008. "Testing for unit and fractional orders of integration in the trend and seasonal components of US monetary aggregates," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 35(3), pages 241-253, July.
    38. Aiolfi, Marco & Catão, Luis A.V. & Timmermann, Allan, 2011. "Common factors in Latin America's business cycles," Journal of Development Economics, Elsevier, vol. 95(2), pages 212-228, July.
    39. Fiess, Norbert M. & Fugazza, Marco & Maloney, William F., 2010. "Informal self-employment and macroeconomic fluctuations," Journal of Development Economics, Elsevier, vol. 91(2), pages 211-226, March.
    40. Gadea, Maria Dolores & Sabate, Marcela & Serrano, Jose Maria, 2004. "Structural breaks and their trace in the memory: Inflation rate series in the long-run," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 14(2), pages 117-134, April.
    41. Milton Friedman, 1971. "Some Dynamic Implications of the Monetary Theory of Nominal Income," NBER Chapters,in: A Theoretical Framework for Monetary Analysis, pages 40-43 National Bureau of Economic Research, Inc.
    42. Ignacio N Lobato & Carlos Velasco, 2007. "Efficient Wald Tests for Fractional Unit Roots," Econometrica, Econometric Society, vol. 75(2), pages 575-589, March.
    43. Demetrescu, Matei & Kuzin, Vladimir & Hassler, Uwe, 2008. "Long Memory Testing In The Time Domain," Econometric Theory, Cambridge University Press, vol. 24(01), pages 176-215, February.
    44. Sollis, Robert & Leybourne, Stephen & Newbold, Paul, 2002. "Tests for Symmetric and Asymmetric Nonlinear Mean Reversion in Real Exchange Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(3), pages 686-700, August.
    45. Velasco, Carlos, 2000. "Non-Gaussian Log-Periodogram Regression," Econometric Theory, Cambridge University Press, vol. 16(01), pages 44-79, February.
    46. Brito, Ricardo D. & Bystedt, Brianne, 2010. "Inflation targeting in emerging economies: Panel evidence," Journal of Development Economics, Elsevier, vol. 91(2), pages 198-210, March.
    47. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-472, June.
    48. Sadorsky, Perry, 2000. "The empirical relationship between energy futures prices and exchange rates," Energy Economics, Elsevier, vol. 22(2), pages 253-266, April.
    49. Cermeño, Rodolfo & Grier, Robin & Grier, Kevin, 2010. "Elections, exchange rates and reform in Latin America," Journal of Development Economics, Elsevier, vol. 92(2), pages 166-174, July.
    50. Kew, Hsein & Harris, David, 2009. "Heteroskedasticity-Robust Testing For A Fractional Unit Root," Econometric Theory, Cambridge University Press, vol. 25(06), pages 1734-1753, December.
    51. Robinson, Peter M. & Velasco, Carlos, 2000. "Whittle pseudo-maximum likelihood estimation for nonstationary time series," LSE Research Online Documents on Economics 2273, London School of Economics and Political Science, LSE Library.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Carlos Pestana Barros, 2016. "Country survey: Angola," Defence and Peace Economics, Taylor & Francis Journals, vol. 27(3), pages 423-432, June.
    2. repec:spr:jecfin:v:41:y:2017:i:2:d:10.1007_s12197-016-9358-6 is not listed on IDEAS

    More about this item

    Keywords

    Macroeconomics; Angola; fractional integration and cointegration; persistence;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nva:unnvaa:wp01-2014. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://ncid.unav.edu .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.