Johansen’s reduced rank maximum likelihood (ML) estimator for cointegration parameters in vector error correction models is known to produce occasional extreme outliers. Using a small monetary system and German data we illustrate the practical importance of this problem. We also consider an alternative generalized least squares (GLS) system estimator which has better properties in this respect....

------------------------------------------------------------------------------------------------------------------Abstract: This study develops new tests for unit roots and cointegration rank in heterogeneous time series panels using methods that are robust to the presence of both incidental trends and cross sectional dependency of unknown form. Furthermore, the procedures do not require a choi...

This study employs auto-regressive distributed lag (ARDL) bounds approach to cointegration for long run and errorcorrection modeling (ECM) for short run analysis to examine the relationship between revenue gap and economic growth for Pakistan using annual time series data over the period 1980 to 2008. The short and long run results indicate that revenue gap is statistical significant and negati...

Many researchers have used a cointegration approach to test for the Fisher effect. This note argues that the cointegration of the nominal interest rate and the inflation rate is consistent with any theory implying a stationary real interest rate and so is not a sufficient condition for ex post the Fisher effect to hold. The sufficient condition is the unpredictability of the inflation forecast ...

In this paper we estimate the demand for exports and imports of manufactured goods for a panel containing the majority of the EU countries as well as the US and Japan. The model includes as explanatory factors both the traditional determinants of trade and also the stock of foreign direct investment (FDI). We apply panel unit root and cointegration tests allowing for heterogeneity. Whereas ther...

We derive a de nition of linear cointegration for nonlinear stochastic processes using a martingale representation theorem. The result shows that stationary linear cointegrations can exhibit nonlinear dynamics, in contrast with the normal assumption of linearity. We propose a sequential nonparametric method to test rst for cointegration and second for nonlinear dynamics in the cointegrated syst...

Using the Johansen cointegration technique, we find empirical evidence of long run comovements between five national stock market indexes and measures of aggregate real activity including the real oil price, real consumption, real money, and real output. Real returns on these indexes are typically related to transitory deviations from the long run relationship and to changes in the macroeconomi...

Johansen’s reduced rank maximum likelihood (ML) estimator for cointegration parameters in vector error correction models is known to produce occasional extreme outliers. Using a small monetary system and German data we illustrate the practical importance of this problem. We also consider an alternative generalized least squares (GLS) system estimator which has better properties in this respect....

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 study is concerned with understanding of the factors of aggregate, nonviolent and violent crime categories in Turkey for the period 1965-2009. The determinants of all crime categories are related to selected socio-economic factors. Bounds testing approach to cointegration is employed to test the existence of long-run relationship amongst the variables. Cointegration analysis yields the maj...