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Showing papers on "Cointegration published in 2000"


Journal ArticleDOI
TL;DR: In this article, the causal relationship between energy consumption and income for India, Indonesia, the Philippines and Thailand, using cointegration and error-correction modelling techniques, is estimated. But the results do not support the view that energy and income are neutral with respect to each other, with the exception of Indonesia and India where neutrality is observed in the short-run.

1,191 citations


Journal ArticleDOI
TL;DR: In this article, the causal relationship of GDP and energy use in the USA in the post-war period was analyzed and the results showed that cointegration does occur and that energy input cannot be excluded from the co-integration space.

858 citations


Journal ArticleDOI
TL;DR: In this article, the authors applied recently developed unit root and cointegration models to determine the appropriate Granger relations between stock prices and exchange rates using recent Asian flu data, and found that data from South Korea are in agreement with the traditional approach.

815 citations


Journal ArticleDOI
TL;DR: In this paper, a cointegration model with piecewise linear trend and known break points is proposed to test co-integration rank, restrictions on the cointegrating vector as well as the slopes of the broken linear trend.
Abstract: When analysing macroeconomic data it is often of relevance to allow for structural breaks in the statistical analysis. In particular, cointegration analysis in the presence of structural breaks could be of interest. We propose a cointegration model with piecewise linear trend and known break points. Within this model it is possible to test cointegration rank, restrictions on the cointegrating vector as well as restrictions on the slopes of the broken linear trend.

741 citations


Journal ArticleDOI
TL;DR: In this paper, the authors discuss the importance of stationarity for empirical modeling and inference, explain the effects of incorrectly assuming stationarity, and formulate a class of nonstationary processes (autoregressions with unit roots) that seem empirically relevant for analyzing economic time series.
Abstract: importance of stationarity for empirical modeling and inference; describe the effects of incorrectly assuming stationarity ; explain the basic concepts ofnonstationarity ; note some sources of non-stationarity ; formulate a class of nonstationary processes (autoregressions with unit roots) that seem empirically relevant for analyzing economic time series; and show when an analysis can be transformed by means of differencing and cointegrating combinations so stationarity becomes a reasonable assumption . We then describe how to test for unit roots and cointegration . Monte Carlo simulations and empirical examples illustrate the analysis .

597 citations


Journal ArticleDOI
TL;DR: In this article, the authors examined the long-term equilibrium relationship between the Singapore stock index and selected macroeconomic variables, as well as among stock indices of Singapore, Japan, and the United States.

442 citations


Posted Content
TL;DR: In this paper, the authors provide an overvie of topics in nonstationary panels: panel unit root tests, panel cointegration tests, and estimation of panel co-integration models.
Abstract: This paper provides an overvie of topics in nonstationary panels: panel unit root tests, panel cointegration tests, and estimation of panel cointegration models. In addition it surveys recent developments in dynamic panel data models.

404 citations


Journal ArticleDOI
TL;DR: In this paper, the authors examined the short and long-run dynamic relationships exhibited between economic growth and growth in the insurance industry for nine OECD countries, and found that these relationships are country specific and any discussion of whether the industry does promote economic growth will be dependent on a number of national circumstances.
Abstract: This article examines the short- and long-run dynamic relationships exhibited between economic growth and growth in the insurance industry for nine OECD countries. This is achieved by conducting a cointegration analysis on a unique set of annual data for real GDP and total real premiums issued in each country from 1961 to 1996. Causality tests are also conducted, which account for long-run trends within the data. The results from the tests suggest that in some countries, the insurance industry Granger causes economic growth, and in other countries, the reverse is true. Moreover, the results indicate that these relationships are country specific and any discussion of whether the insurance industry does promote economic growth will be dependent on a number of national circumstances.

388 citations


Book
01 Sep 2000
TL;DR: This article reported the results of a project to estimate and test the stability properties of conventional equations relating real imports and exports of goods and services for the G-7 countries to their incomes and relative prices.
Abstract: This paper reports the results of a project to estimate and test the stability properties of conventional equations relating real imports and exports of goods and services for the G-7 countries to their incomes and relative prices. We begin by estimating cointegration vectors and the error-correction formulations. We then test the stability of these equations using Chow and Kalman-Filter tests. The evidence suggests three findings. First, conventional trade equations and elasticities are stable enough, in most cases, to perform adequately in forecasting and policy simulations. Equations for German trade, as well as equations for French and Italian exports, are an exception. Second, income elasticities of U.S. trade have not been shifting in a direction that will tend to ease the trend toward deterioration in the U.S. trade position. The income-elasticity gap for Japan found in earlier studies was not confirmed in this analysis. Finally, the price channel is weak, if not wholly ineffective, in the case of continental European countries.

370 citations


Book
29 Jun 2000
TL;DR: A Review of Estimation and model building: The Bivariate case extending estimation and model-building to several regressors An Introduction to Non-stationary Univariate Time Series Models Developments of Non-stochastic time series models Stationarity and non-stationarity in Single Equation Regression Analysis Endogeneity and the Fully Modified OLS Estimator as discussed by the authors.
Abstract: PART 1: FOUNDATIONS Economics and Quantitative Economics Some Preliminaries An Introduction to Stationary and Non-Stationary Random Variables PART 2: ESTIMATION AND SIMULATION A Review of Estimation and Model Building: The Bivariate Case Extending Estimation and Model Building to Several Regressors An Introduction to Nonstationary Univariate Time Series Models Developments of Nonstationary Univariate Time Series Models Stationarity and Nonstationarity in Single Equation Regression Analysis Endogeneity and the Fully Modified OLS Estimator PART 3: APPLICATIONS The Demand for Money The Term Structure of Interest Rates The Phillips Curve The Exchange Rate and Purchasing Power Parity PART 4: EXTENSIONS Multivariate Models and Cointegration Applications of Multivariate Models Involving Cointegration Autoregressive Conditional Heteroscedasticity: Modelling Volatility

367 citations


Journal ArticleDOI
TL;DR: In this article, the authors used threshold cointegration tests that allow for asymmetric adjustment toward a long run equilibrium relationship to examine price linkages between principal maize markets in Ghana and found that wholesale maize prices in local markets (Accra and Bolgatanga) respond more swiftly to increases than to decreases in central market (Techiman) prices.

Posted Content
TL;DR: In this article, a maximum likelihood estimator based on a transformed likelihood function is proposed and shown to be consistent and asymptotically normally distributed irrespective of the unit root and cointegrating properties of the underlying PVAR model.
Abstract: This paper considers estimation and inference in panel vector autoregressions (PVARs) with fixed effects when the time dimension of the panel is finite, and the cross-sectional dimension is large. A Maximum Likelihood (ML) estimator based on a transformed likelihood function is proposed and shown to be consistent and asymptotically normally distributed irrespective of the unit root and cointegrating properties of the underlying PVAR model. The transformed likelihood framework is also used to derive unit root and cointegration tests in panels with short time dimension; these tests have the attractive feature that they are based on standard chi-square and normal distributed statistics. Examining Generalized Method of Moments (GMM) estimation as an alternative to our proposed ML estimator, it is shown that conventional GMM estimators based on standard orthogonality conditons break down if the underlying time series contain unit roots. Also, the implementation of extended GMM estimators making use of variants of homoskedasticity and stationarity restrictions as suggested in the literature in a univariate context is subject to difficulties. Monte Carlo evidence is adduced suggesting that the ML estimator and parameter hypothesis and cointegration tests based on it perform well in small sample; this is in marked contrast to the small sample performance of the GMM estimators.

Journal ArticleDOI
TL;DR: The authors showed that unit root and cointegration tests with a nominal size of 5% have true sizes that range from 0.90 to 0.99 in 100-year long data series, even though there is a permanent component that accounts for 42% of the real exchange rate.

Journal ArticleDOI
TL;DR: In this article, the existence of a significant, long-run relationship between stock prices and domestic and international economic activity in six European economies has been investigated using the Johansen Cointegration tests.

Journal ArticleDOI
TL;DR: Examination of stationarity and cointegration of health expenditure and GDP, for a sample of 21 OECD countries using data for the period 1960-1997, by applying a test battery that allows robust inference to be made, indicates that both health spending and GDP are non-stationary.

Journal ArticleDOI
TL;DR: In this paper, the authors investigated whether there is a relationship between international trade and international travel flows using time series econometric techniques and found support for prior beliefs that international travel and international trade leads to international trade.
Abstract: This paper investigates, for the first time, whether there is a relationship between international trade and international travel flows using time series econometric techniques. Using data for Australia and four important travel and trading partners, the USA, the UK, NZ and Japan, the paper tests three specific hypotheses: that business travel leads to international trade; that international trade leads to international travel; and that international travel, other than business travel, leads to international trade. Using cointegration and Granger-causality approaches the paper finds support for prior beliefs that there is a relationship between international travel and international trade, and suggests that this may be a fruitful area for further research.

BookDOI
01 Jul 2000
TL;DR: In this paper, a tourism demand model based on the panel data approach is presented. And the authors evaluate the performance of different models and evaluate their performance in terms of forecasting accuracy.
Abstract: Preface. Introduction to Tourism Demand Analysis. Introduction. Determinants of tourism demand. Functional form and demand elasticities. Summary. Traditional Methodology of Tourism Demand Modelling. Introduction. Traditional methodology of tourism demand modelling. Failure of the traditional approach to tourism demand modelling. General-to-Specific Modelling. Introduction. General-to-specific modelling. Tests of restrictions on regression parameters. Diagnostic checking. Model selection. Worked example. Cointegration. Spurious regression. The concept of cointegration. Test for order of integration. Test for Cointegration. Error Correction Model. Cointegration and error correction mechanism. Estimating the ECM. Worked example. Vector Autoregression (VAR) and Cointegration. Introduction. Basics of VAR analysis. Impulse response analysis. Forecasting with VAR and error variance decomposition. Testing for Granger causality and exogeneity. An example of VAR modelling. VAR modelling and cointegration. Time Varying Parameter Modelling. Introduction. Are tourism demand elasticities constant over time? The TVP model and Kalman filter. A worked example. Summary and conclusions. Panel Data Analysis. Introduction. Model specification and estimation. An empirical study of a tourism demand model based on the panel data approach. Summary and conclusions. Evaluation of Forecasting Performance. Introduction. Measures of forecasting accuracy. Forecasting evaluation of different models. Concluding remarks. References. Author index. Subject index.

Journal ArticleDOI
TL;DR: In this paper, the causality and cointegration relationship among the stock markets of the United States, Japan and the South China Growth Triangle (SCGT) region was explored.

Journal ArticleDOI
TL;DR: This article applied pooled time series estimation on a forward-looking monetary model, resulting in parameter estimates which are in compliance with the underlying theory based on a panel version of the Engle and Granger [Engle, RF, Granger, CWJ, 1987 Co-integration and error correction: representation, estimation and testing, Econometrica 55, 251,276] two-step procedure.

Journal ArticleDOI
TL;DR: In this paper, a cointegration and variance decomposition analysis was used to examine the linkages among the stock markets of 12 Asia-Pacific countries, before and during the period of the Asian financial crisis.

Journal ArticleDOI
Perry Sadorsky1
TL;DR: In this paper, the interaction between energy futures prices and exchange rates is investigated and it is shown that futures prices for crude oil, heating oil and unleaded gasoline are co-integrated with a trade-weighted index of exchange rates.

Journal ArticleDOI
TL;DR: In this article, the stability of M3 demand for money in Germany is evaluated using CUSUM and CUSUMSQ in the context of error-correction modeling and cointegration.

Journal ArticleDOI
TL;DR: In this paper, the authors investigate linkages among farm, wholesale, and retail markets using weekly price data for the period covering 1987 through 1998, using a threshold cointegration model that permits asymmetric adjustment to positive and negative price shocks.
Abstract: The US pork sector has experienced many significant structural changes in recent years. Such changes may have influenced price dynamics and transmission of shocks through marketing channels. We investigate linkages among farm, wholesale, and retail markets using weekly price data for the period covering 1987 through 1998. Our analysis uses a threshold cointegration model that permits asymmetric adjustment to positive and negative price shocks. Our results reveal important asymmetries. Our results are consistent with existing literature which has determined that price adjustment patterns are unidirectional and that information tends to flow from farm, to wholesale, to retail markets.

Journal ArticleDOI
TL;DR: In this article, the authors examined the relative importance of three pricing factors for American Depository Receipts (ADRs): the price of the underlying shares in the local currency, the relevant exchange rate, and the US market index.
Abstract: This paper extends previous research by considering three pricing factors for American Depository Receipts (ADRs): the price of the underlying shares in the local currency, the relevant exchange rate, and the US market index. Using both a vector autoregressive (VAR) model with a cointegration constraint and a seemingly-unrelated regression (SUR) approach, we examine the relative importance of, and the speed of adjustment of ADR prices to, these underlying factors. Our results show that while the price of the underlying shares is most important, the exchange rate and the US market also have an impact on ADR prices. While the bulk of the shocks to the pricing factors are reflected in the ADRs within the same calendar day, there are indications that the adjustments are not completed until the following day. Curiously, the ADRs appear to initially overreact to the US market index but underreact to changes in underlying share prices and exchange rates.

Journal ArticleDOI
TL;DR: In this article, a simple model of foreign direct investment is developed and tested on investment flows from the USA to Mexico between 1967 and 1994 using cointegration analysis, suggesting support for both the "cheap labour" and "market size" hypotheses.
Abstract: In this paper a simple model of foreign direct investment is developed and tested on investment flows from the USA to Mexico between 1967 and 1994 using cointegration analysis. Domestic demand and relative factor costs are found to influence direct investment flows, suggesting support for both the ‘cheap labour’ and ‘market size’ hypotheses. The short-run dynamics of the model indicate that exchange rate movements have an effect on the timing of the investment decision.

Journal ArticleDOI
TL;DR: In this paper, the authors present a simple endogenous growth model which explicitly incorporates any positive (negative) externalities generated by additions to the foreign capital stock, and use cointegration analysis to estimate a dynamic labour productivity function for the 1960-95 period.
Abstract: This article addresses the important question of whether foreign direct investment enhances economic growth and labour productivity in Mexico, both from a theoretical and empirical perspective. After briefly reviewing the Mexican experience with net FDI inflows during the 1990s, the article presents a simple endogenous growth model which explicitly incorporates any positive (negative) externalities generated by additions to the foreign capital stock. Using cointegration analysis, the article estimates a dynamic labour productivity function for the 1960-95 period that includes the impact of the growth rate in the stocks of both private and foreign capital (as opposed to the flows) and the economically active population (EAP) (rather than the rate of population growth). The error correction model (ECM) estimates suggest that increases in both private ad (lagged) foreign investment spending, as well as the rate of growth in exports, have a positive and economically significant effect on the rate of labour pr...

01 Jan 2000
TL;DR: In this article, the causal relationship between financial development and economic growth in Turkey was examined and five alternative proxies for financial development were developed and Granger causality tests applied using the cointegration and vector error correction methodology (VECM).
Abstract: This paper examines the causal relationship between financial development and economic growth in Turkey. Five alternative proxies for financial development are developed and Granger causality tests applied using the cointegration and vector error correction methodology (VECM). The empirical results show that the direction of causality between financial development and economic growth in Turkey is sensitive to the choice of proxy used for financial development. For example, when financial development is measured by the money to income ratio the direction of causality runs from financial development to economic growth, but when the bank deposits, private credit and domestic credit ratios are alternatively used to proxy financial development, growth is found to lead financial development. On balance, however, for Turkey, growth seems to lead financial sector development.

Journal ArticleDOI
TL;DR: In this paper, the impact of exchange rate variability on total exports and exports of China by SITC category is estimated by the conditional variance of the real effective exchange rate index from an autoregressive conditional heteroscedastic model.

Journal ArticleDOI
TL;DR: In this paper, the authors classify daily stock returns of Standard and Poor 500 companies on the basis of a company's size and its business or industrial sector and estimate the strength of long-range dependence in the stock volatilities using two different methods.
Abstract: Recent empirical studies show that the squares of high-frequency stock returns are long-range dependent and can be modeled as fractionally integrated processes, using, for example, long-memory stochastic volatility models. Are such long-range dependencies common among stocks? Are they caused by the same sources of variation? In this article, we classify daily stock returns of Standard and Poor 500 companies on the basis of a company's size and its business or industrial sector and estimate the strength of long-range dependence in the stock volatilities using two different methods. Almost all of the companies analyzed exhibit strong persistence in volatility. We then use a canonical correlation method to identify common long-range dependent components in groups of companies, finding strong evidence in support of common persistence in volatility. Finally, we use a chi-squared test to study the effects of company size and sector on the number of common long-range dependent volatility components detected in g...

Journal ArticleDOI
TL;DR: In this article, a survey is given of some results obtained for the cointegrated VAR and the notions of cointegration and common trends are defined, and a statistical model for co-integrated I (1) variables is defined.