Engle’s footsteps range widely. His major contributions include early work on band-spectral regression, development and unification of the theory of model specification tests (particularly Lagrange multiplier tests), clarification of the meaning of econometric exogeneity and its relationship to causality, and his later stunningly influential work on common trend modeling (cointegration) and vol...

We used unit root and cointegration techniques to determine the long run relationship between GDP and investment for 90 countries using data from World Bank for the period 1960-1992. In the first step of our analysis we found GDP and investment integrated of different orders for 33 countries. Second step of our analysis shows no cointegration between GDP and investment for 25 countries and coin...

In an economy where agents hold money, the short interest rate determines the trade-off between money holdings and consumption. Building on this idea, we develop a theoretical model that shows the transmission mechanism through which the short rate finds its way to stock-return predictability regressions. We construct a cointegration relation that links share prices and dividends to the short i...

To understand the general relationship between Energy Conservation and Emissions Reduction (ECER) policy means coordination (PMC) and economic growth, this paper quantitatively investigates the impact on economic growth of differing PMCs. ECER policies from 1978 to 2013 in China are quantified across two dimensions of policy power and policy means, and then, PMC degrees are designed as independ...

We examine the properties of several residual-based cointegration tests when long run parameters are subject to multiple shifts driven by an unobservable Markov process. Unlike earlier work, which considered one-o¤ deterministic breaks, our approach has the advantage of allowing for an unspeci…ed number of stochastic breaks. We illustrate this issue by exploring the possibility of Markov switch...

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 ...

Applying Johansen cointegration test to U.S. annual data constructed from the EU KLEMS database, the paper documents that the productivities of consumption-goods and equipmentgoods sector are cointegrated. It confirms further, using the non-linear cointegration test framework developed by Kapetanios et al. (2006), that the cointegrating relation is non-linear. The cointegration of sectoral prod...