Testing Hypotheses in an I(2) Model with Applications to the Persistent Long Swings in the Dmk/$ Rate
Publikation: Working paper › Forskning
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Testing Hypotheses in an I(2) Model with Applications to the Persistent Long Swings in the Dmk/$ Rate. / Johansen, Søren; Juselius, Katarina; Frydman, Roman; Goldberg, Michael.
Department of Economics, University of Copenhagen, 2007.Publikation: Working paper › Forskning
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TY - UNPB
T1 - Testing Hypotheses in an I(2) Model with Applications to the Persistent Long Swings in the Dmk/$ Rate
AU - Johansen, Søren
AU - Juselius, Katarina
AU - Frydman, Roman
AU - Goldberg, Michael
N1 - JEL Classification: C32, C52, F41
PY - 2007
Y1 - 2007
N2 - results on the test of overidentifying restrictions on ß'xt and the asymptotic variance for the stochastic trends parameters, a¿1: How to specify deterministic components in the I(2) model is discussed at some length. Model specification and tests are illustrated with an empirical analysis of long and persistent swings in the foreign exchange market between Germany and USA. The data analyzed consist of nominal exchange rates, relative prices, US inflation rate, two long-term interest rates and two short-term interest rates over the 1975-1999 period. One important aim of the paper is to demonstrate that by structuring the data with the help of the I(2) model one can achieve a better understanding of the empirical regularities underlying the persistent swings in nominal exchange rates, typical in periods of floating exchange rates
AB - results on the test of overidentifying restrictions on ß'xt and the asymptotic variance for the stochastic trends parameters, a¿1: How to specify deterministic components in the I(2) model is discussed at some length. Model specification and tests are illustrated with an empirical analysis of long and persistent swings in the foreign exchange market between Germany and USA. The data analyzed consist of nominal exchange rates, relative prices, US inflation rate, two long-term interest rates and two short-term interest rates over the 1975-1999 period. One important aim of the paper is to demonstrate that by structuring the data with the help of the I(2) model one can achieve a better understanding of the empirical regularities underlying the persistent swings in nominal exchange rates, typical in periods of floating exchange rates
KW - Faculty of Social Sciences
KW - PPP puzzle
KW - forward premium puzzle
KW - cointegrated VAR
KW - likelihood inference
M3 - Working paper
BT - Testing Hypotheses in an I(2) Model with Applications to the Persistent Long Swings in the Dmk/$ Rate
PB - Department of Economics, University of Copenhagen
ER -
ID: 1947792