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Some Structural Hypotheses in a Multivariate Cointegration Analysis of the Purchasing Power Parity and the Uncovered Interest Parity for UK
Søren Johansen,Katarina Juselius +1 more
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In this paper, the authors developed some new tests for structural hypotheses in the framework of a multivariate error correction model with Gausian errors, motivated by an empirical investigation of the PPP relation and the UIP relation for the United Kingdom.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.read more
Citations
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Estimation and hypothesis testing of cointegration vectors in Gaussian vector autoregressive models / Søren Johansen
TL;DR: In this paper, the authors present the likelihood methods for the analysis of cointegration in VAR models with Gaussian errors, seasonal dummies, and constant terms, and show that the asymptotic distribution of the maximum likelihood estimator is mixed Gausssian.
Journal ArticleDOI
The Power of Cointegration Tests
TL;DR: In this paper, Monte Carlo analysis and an empirical study of U.K. money demand demonstrate that when cointegration exists, the error-correction test generally is more powerful than the Dickey-Fuller test.
Journal ArticleDOI
Financial Development and Economic Growth: The Role of Stock Markets
TL;DR: This article examined the relationship between stock market development and economic growth, controlling for the effects of the banking system and stock market volatility, and found that although both banks and stock markets may be able to promote economic development, the erects of the former are more powerful.
Journal ArticleDOI
A quantitative reassessment of the finance–growth nexus: evidence from a multivariate VAR
Kul B. Luintel,Mosahid Khan +1 more
TL;DR: In this article, the long-run relationship between financial development and economic growth is examined in a multivariate vector autoregression (VAR) framework using 10 sample countries, and the authors find bi-directional causality.
Journal ArticleDOI
A Fractional Cointegration Analysis of Purchasing Power Parity
Yin-Wong Cheung,Kon S. Lai +1 more
TL;DR: In this article, a generalized notion of cointegration, called fractional co-integration is introduced to examine the long-run purchasing power parity (PPP) hypothesis, and empirical results show that PPP reversion exists and can be characterized by a fractionally integrated process in three out of five countries studied.
References
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Journal ArticleDOI
Statistical analysis of cointegration vectors
TL;DR: In this paper, the authors consider a nonstationary vector autoregressive process which is integrated of order 1, and generated by i.i.d. Gaussian errors, and derive the maximum likelihood estimator of the space of cointegration vectors and the likelihood ratio test of the hypothesis that it has a given number of dimensions.
Estimation and hypothesis testing of cointegration vectors in Gaussian vector autoregressive models / Søren Johansen
TL;DR: In this paper, the authors present the likelihood methods for the analysis of cointegration in VAR models with Gaussian errors, seasonal dummies, and constant terms, and show that the asymptotic distribution of the maximum likelihood estimator is mixed Gausssian.
Book ChapterDOI
A Monetary Approach To The Exchange Rate: Doctrinal Aspects And Empirical Evidence
TL;DR: In this paper, the role of expectations in exchange rate determination and a direct observable measure of expectations is proposed, based on the information that is contained in data from the forward market for foreign exchange.
Posted Content
On the Mark: A Theory of Floating Exchange Rates Based on Real Interest Differentials
TL;DR: In this article, the authors developed a model which is a version of the asset view of the exchange rate, in that it emphasizes the role of expectations and rapid adjustment in capital markets, and it combines the Keynesian assumption of sticky prices with the Chicago assumption that there are secular rates of inflation.
Journal ArticleDOI
Deviations from Purchasing Power Parity in the Long Run
Michael Adler,Bruce N. Lehmann +1 more
TL;DR: This article showed that deviations from purchasing power parity reveal a remarkable and possibly startling consistency with martingale behavior during both fixed and flexible exchange rate periods, for a wide variety of countries, and in both monthly and annual data.
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