A Structured VAR for Denmark under Changing Monetary Regimes.
ABSTRACT Using recently developed statistical tools for analyzing cointegrated I(2) data, this article models money, income, prices, and interest rates in Denmark. The final model describes the dynamic adjustment to short-run changes of the process, to deviations from long-run steady states, and to several political interventions. It provides new insights about the effects of the liberalization of trade and capital in a small open European economy.
- SourceAvailable from: uni-muenchen.de[show abstract] [hide abstract]
ABSTRACT: This paper uses the extreme bounds analysis (EBA) of Leamer (1983 &1985) to analyze the robust determinants of the demand for money in a panel of 17 Asian countries for the period 1970 to 2009. These robust determinants are found to be unit root variables. Therefore, cointegration between these variables is tested with a recent time series panel method developed by Westerlund (2007). This method uses the error-correction formulation and has more power against the null of no cointegration. The results show that there is a well-defined long-run demand for money. Using the lagged error correction term from the estimated cointegrating equation, the short-run dynamic relationships are estimated. This paper, thus, suggests some useful guidelines to estimate other relationships with panel data.07/2012;
- [show abstract] [hide abstract]
ABSTRACT: In this paper, a vector error correction model for Euro area money, prices, output, long-term interest rate and short-term interest rate with three identified cointegration relations is specified. It is shown that Euro area money and prices can be considered as variables that are integrated of order two or I(2), that is, they have to be differenced twice to become stationary. Accordingly, the relation between money, prices and other macroeconomic variables is analyzed in an econometric framework which is suited for the analysis of I(2)-variables. Monetary policy implications are derived from the estimated system. Copyright Springer-Verlag 2004Empirical Economics 02/2004; 29(3):553-574. · 0.60 Impact Factor
- [show abstract] [hide abstract]
ABSTRACT: This paper presents the likelihood ratio (LR) test for the number of cointegrating relations in the I(2) vector autoregressive model. It is shown that the asymptotic distribution of the LR test for the cointegration ranks is identical to the asymptotic distribution of the much applied test statistic based on the two-step estimation procedure in Johansen (1995, Econometric Theory 11, 25 59), Paruolo (1996, Journal of Econometrics 72, 313 356), and Rahbek, Kongsted, and J rgensen (1999, Journal of Econometrics 90, 265 289). By construction the LR test statistic is smaller than the non-LR test statistic from the two-step procedure, and application of the LR test may change rank selection in empirical work. Based on a study of existing empirical applications and related Monte Carlo simulations we conclude that the LR test has much better size properties when compared to the two-step-based test. Overall, we propose use of the LR test for rank determination in I(2) analysis.Discussions with S ren Johansen, Hans Christian Kongsted, and Bent Nielsen are gratefully acknowledged. We also thank the editor and three anonymous referees for very constructive comments that have led to a much improved version of the paper. This research was supported by Danish Social Sciences Research Council grant 2114-04-0001.Econometric Theory 01/2007; 23(04):615-637. · 1.48 Impact Factor