We assess the sustainability of public finances in the EU15 using stationarity and cointegration analysis. Specifically, we use panel unit root tests of the first and second generation allowing in some cases for structural breaks. We also apply modern panel cointegration techniques developed by Pedroni (1999, 2004), generalized by Banerjee and Carrion-i-Silvestre (2006) and Westerlund and Edger...

This paper examines the validity of purchasing power parity (PPP) using CPI and Big Mac prices. The benchmark model, i.e., the OLS method, which does not take nonstationarity into account, rejects the hypothesis of PPP regardless of prices used. We next use the panel cointegration method to consider the nonstationary nature of variables. Estimated results for CPI are mixed. The PPP is rejected ...

In this paper, we propose new tests for threshold cointegration in the autoregressive distributed lag (ADL) model. The indicators in the threshold model are based on either a nonstationary or stationary threshold variable. The cointegrating vector in this paper is not pre-specified. We adopt a supremum Wald type test to account for the so-called Davies problem. The asymptotic null distributions...

We investigate the long-term equilibrium relationship between Australian dollar bonds of different credit quality. Contrary to the expectations hypothesis we find the yields of Eurobonds are not cointegrated with the equivalent maturity Government bond. Nevertheless, the results suggest that the yields of the different risk classes of Eurobonds are cointegrated with one another, with the higher...

This paper investigates the nature of the causal relationship between stock prices and macroeconomic aggregates in the foreign sector in India. By applying the techniques of unit–root tests, cointegration and the long–run Granger non–causality test recently proposed by Toda and Yamamoto (1995), we test the causal relationships between the BSE Sensitive Index and the three macroeconomic variable...

Using the most recently available data, this paper estimates the price and income elasticities of gasoline demand in the United States from a semiparametric smooth coefficient model. The econometric approach provides more flexibility by allowing functional coefficients to accommodate heterogeneity in gasoline demand. Instrumental variables are used to correct for the potential endogeneity of th...

This paper aims to examine the impacts of oil-price shocks on China’s price levels. To that end, we develop a partial transmission input-output model that captures the uniqueness of the Chinese market. We hypothesize and simulate price control, market factors and technology substitution the three main factors that restrict the functioning of a price pass-through mechanism during oil-price shock...

In November 2014, OPEC announced a new strategy geared towards improving its market share. Oil-market analysts interpreted this as an attempt to squeeze higher-cost producers including US shale oil out of the market. Over the next year, crude oil prices crashed, with large repercussions for the global economy. We present a simple equilibrium model that explains the fundamental market factors th...

We examine the price dynamics in Indian cities using cointegration analysis. We identify and then calculate a common trend for prices in these 25 cities. We obtain the impulse response functions to calculate the rates of convergence to the prices, and find that the half-life of any shock is very small for Indian cities. Although a close to three-month half-life seems too fast, there are some in...