This paper draws attention to the limitations of the standard unit root/cointegration approach to economic and financial modelling, and to some of the alternatives based on the idea of fractional integration, long memory models, and the random field regression approach to nonlinearity. Following brief explanations of fractional integration and random field regression, and the methods of applyin...

We ®nd empirical evidence that in ̄ation, nominal, and real interest rates in the US are trend-stationary with a structural break in both the unconditional mean and the drift rate of a deterministic trend, which occurs shortly after the change in operating procedures of the Fed in September 1979. This ®nding casts some doubts on cointegration tests of the long-run Fisher e€ect conducted in recen...

Nonlinear Adjustment to Purchasing Power Parity in the post-Bretton Woods Era Christopher F. Baum Department of Economics Boston College John T. Barkoulas Department of Economics and Finance Louisiana Tech University Mustafa Caglayan Department of Economics and Finance University of Durham, UK This paper models the dynamics of adjustment to long-run PPP over the post-Bretton Woods period in a n...

In this paper, we provide a comprehensive multivariate cointegration analysis of three parts of the steam coal value chain – export, transport and import prices. The analysis is based on a rich dataset of international coal prices; in particular, we combine data on steam coal prices with freight rates, covering the period December 2001 until August 2009 at weekly frequency. We then test whether...

Empirical research has often found that nominal interest and in‡ation rates to be non-stationary. Thus, the analysis of the Fisher effect has been commonly based on cointegration/unit roots techniques. However, we should consider that a potentially serious ‡aw in previous studies is the failure to allow for structural breaks in these variables. Thus, the use of unit roots tests that take into a...

In this note we consider the treatment of structural breaks in VAR models used to test for unit roots and cointegration. We give practical guidelines for the inclusion and the specification of intervention dummies in those models. JEL Classification Code: C32, C52, E43.

This paper estimates the causal relationships between energy consumption and income for India, Indonesia, the Philippines and Thailand, using cointegration and error-correction modelling techniques. The results indicate that, in the short-run, unidirectional Granger causality runs from energy to income for India and Indonesia, while bidirectional Granger causality runs from energy to income for...

This paper examines the relationship between US disposable personal income (DPI) and house price index (HPI) during the last twenty years applying fractional integration and longrange dependence techniques to monthly data from January 1991 to July 2010. The empirical findings indicate that the stochastic properties of the two series are such that cointegration cannot hold between them, as mean ...

In this study, we look at the relationship between export stability, investment and economic growth in nine Asian countries using time series data. The few previous time series studies in this area have not paid any attention to stationarity and cointegration issues. We find that in most cases, the variables are non-stationary in their levels and not cointegrated. These results raise serious do...