Testing hypotheses in an I(2) model with piecewise linear trends. An analysis of the persistent long swings in the Dmk/$ rate
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Testing hypotheses in an I(2) model with piecewise linear trends. An analysis of the persistent long swings in the Dmk/$ rate. / Johansen, Søren; Juselius, Katarina; Frydman, Roman; Goldberg, Michael.
In: Journal of Econometrics, Vol. 158, No. 1, 2010, p. 117-129.Research output: Contribution to journal › Journal article › Research › peer-review
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TY - JOUR
T1 - Testing hypotheses in an I(2) model with piecewise linear trends. An analysis of 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 - 2010
Y1 - 2010
N2 - This paper discusses the I(2) model with breaks in the deterministic component and illustrates with an analysis of German and US prices, exchange rates, and interest rates in 1975--1999. It provides new results on the likelihood ratio test of overidentifying restrictions on the cointegrating relations when they contain piecewise linear trends. One important aim of the paper is to demonstrate that a structured I(2) analysis is useful for a better understanding of the empirical regularities underlying the persistent swings in nominal exchange rates, typical in periods of floating exchange rates.
AB - This paper discusses the I(2) model with breaks in the deterministic component and illustrates with an analysis of German and US prices, exchange rates, and interest rates in 1975--1999. It provides new results on the likelihood ratio test of overidentifying restrictions on the cointegrating relations when they contain piecewise linear trends. One important aim of the paper is to demonstrate that a structured I(2) analysis is useful for 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
KW - long swings puzzle
KW - cointegrated VAR
KW - test of overidentification
U2 - 10.1016/j.jeconom.2010.03.018
DO - 10.1016/j.jeconom.2010.03.018
M3 - Journal article
VL - 158
SP - 117
EP - 129
JO - Journal of Econometrics
JF - Journal of Econometrics
SN - 0304-4076
IS - 1
ER -
ID: 20943732