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This paper aims to empirically test for multiple cointegrating vectors in a holistic manner. Theoretical developments imply bivariate cointegration among stock prices, dividends, output and consumption where independent models identify key theoretical cointegration vectors.

This paper considers both Johansen and Horvath–Watson testing approaches for cointegration. This paper also examines the forecasting power of these cointegrating relationships against alternate forecast variables.

The results suggest evidence of a long-run cointegrating relationship between stock prices, dividends, output and consumption, although not necessarily linked by a single common stochastic trend; each series responds to disequilibrium with greater evidence of a reaction from dividends and consumption – of note, output responds to changes in stock market equilibrium; and there is forecast power from the joint stock market–macro cointegrating vector for stocks returns and consumption growth over the historical average. Of particular note, other forecast models that include consumption perform well and suggest a key role for this variable in stock return and consumption growth forecasts.

This is the first paper to combine the cointegrating relationships between stocks, dividends, output and consumption. Thus, the empirical validity of stated theoretical hypotheses can be analysed. The forecast results also demonstrate the usefulness of this. They also show that forecast models that include consumption perform well and suggest a key role for this variable in stock return and consumption growth forecasts.

The purpose of this paper is to provide an extensive review of the monetary model of exchange rate determination which is the main theoretical framework on analyzing exchange rate behavior over the last 40 years. Furthermore, we test the flexible price monetarist variant and the sticky price Keynesian variant of the monetary model. We conduct our analysis employing a sample of 14 advanced economies using annual data spanning the period 1880–2012.

The theoretical background of the paper relies on the monetary model to the exchange rate determination. We provide a thorough econometric analysis using a battery of unit root and cointegration testing techniques. We test the price-flexible monetarist version and the sticky-price version of the model using annual data from 1880 to 2012 for a group of industrialized countries.

We provide strong evidence of the existence of a nonlinear relationship between exchange rates and fundamentals. Therefore, we model the time-varying nature of this relationship by allowing for Markov regime switches for the exchange rate regimes. Modeling exchange rates within this context can be motivated by the fact that the change in regime should be considered as a random event and not predictable. These results show that linearity is rejected in favor of an MS-VECM specification which forms statistically an adequate representation of the data. Two regimes are implied by the model; the one of the estimated regimes describes the monetary model whereas the other matches in most cases the constant coefficient model with wrong signs. Furthermore it is shown that depending on the nominal exchange rate regime in operation, the adjustment to the long run implied by the monetary model of the exchange rate determination came either from the exchange rate or from the monetary fundamentals. Moreover, based on a Regime Classification Measure, we showed that our chosen Markov-switching specification performed well in distinguishing between the two regimes for all cases. Finally, it is shown that fundamentals are not only significant within each regime but are also significant for the switches between the two regimes.

The results are of interest to practitioners and policy makers since understanding the evolution and determination of exchange rates is of crucial importance. Furthermore, our results are linked to forecasting performance of exchange rate models.

The present analysis extends previous analyses on exchange rate determination and it provides further support in favor of the monetary model as a long-run framework to understand the evolution of exchange rates.

The objective of this study is to propose an economic model of the nominal money balances and reserves in the Turkish economy during the period 1960‐1988. As most of the variables show unit root non‐stationarity, an approach based on the error correction system (Phillips, 1991) is adopted. The estimated parameters of the long‐run money balance relationship based on this error correction system are very close to the Johansen‐Juselius (1990) vector autoregressive modelling approach. An error correction system and the vector autoregressive modelling approaches are alternative representations of the cointegrated systems. This study empirically demonstrates the closeness of the two systems using the data from the Turkish monetary sector. The econometric estimates of the elasticities are plausible. In small samples, both approaches may not yield almost identical estimates since the theory underlying these approaches is asymptotic.

The paper's objectives are: to address the issue of cointegration (efficient market hypothesis) between Greek spot and futures markets over the period of the crisis, 1999‐2001; to investigate the short‐run and long‐run efficiency of the FTSE/ASE‐20 stock index futures contract and FTSE/ASE Mid 40 stock index futures contract traded on the Athens Derivatives Exchange (ADEX).

This paper examines efficiency of the Greek stock index futures market from 1999 to 2001. A variety of econometric models are employed to test for cointegration between prices. The paper uses daily data from the Athens Stock Exchanges (ASEs) and the ADEX. A more detailed discussion on the causal relationship between spot and futures price in ADEX is obtained by using the impulse response functions of the vector error‐correction model (to study the behaviour of series from real shocks).

The results show that the Greek futures and spot prices form a stable long‐run relationship. For both FTSE/ASE‐20 and FTSE/ASE Mid 40, futures markets play a price discovery role, implying that futures prices contain useful information about spot prices. Futures markets are informationally more efficient than underlying stock markets in Greece.

The results have important implications for both traders and speculators. The findings are strongly recommended to financial managers dealing with Greek stock index futures.

The contribution of this paper is to provide evidence using data from the early stage of the ADEX (started its official operation on 27 August 1999). It also investigates whether the hypotheses exist after the dramatic rise of ASE stock prices.

An overview of the cointegration approach to econometric specification and estimation is provided. A non‐technical approach is adopted, and is intended to serve as an entry into this important new literature for the reader with no background knowledge of the subject but with some limited knowledge of econometrics. Particular emphases are given to the rationale for using cointegration techniques in the estimation of economic relationships, to providing intuitive explanations of the concepts and techniques, and to demonstrating their applications in practice. Reference is made throughout to other articles which explain particular methods or recent developments more formally and fully than is possible here. Finally, a simple application of cointegration techniques to the estimation of the consumption function is provided.

This survey focuses on two families of nonlinear vector time series models, the family of vector threshold regression (VTR) models and that of vector smooth transition regression (VSTR) models. These two model classes contain incomplete models in the sense that strongly exogeneous variables are allowed in the equations. The emphasis is on stationary models, but the considerations also include nonstationary VTR and VSTR models with cointegrated variables. Model specification, estimation and evaluation is considered, and the use of the models illustrated by macroeconomic examples from the literature.

This paper examines the causal relationship between foreign direct investment (FDI) and economic growth in Turkey using annual data for the period 1968‐2002, by means of cointegration, error‐correction models (ECM) and the augmented vector autoregressive (VAR) methodology developed by Toda and Yamamoto (1995). Johansen (1992) cointegration test results indicate that these two variables are cointegrated. The empirical results from Granger causality tests based on error‐correction models and the augmented level VAR suggest that there is a strong evidence of bi‐directional Granger causality between FDI and economic growth, corroborating the feedback hypothesis for Turkey over the sample period.

This paper aims to investigate the causal nexus between foreign direct investment (FDI) and economic growth in SAARC countries.

Johansen's cointegration test was employed to examine the long‐run relationship between foreign direct investment and economic growth in SAARC countries. Besides, the vector error correction model (VECM) was employed to examine the causal nexus between foreign direct investment and economic growth in SAARC countries for the years 1970‐2007. Finally, the impulse response function (IRF) has been employed to investigate the time paths of log of foreign direct investment (LFDI) in response to one‐unit shock to the log of gross domestic product (LGDP) and vice versa.

The Johansen cointegration result establishes a long‐run relationship between foreign direct investment and gross domestic product (GDP) for the sample of SAARC nations, namely, Bangladesh, India, Maldives, Nepal, Pakistan and Sri Lanka. The empirical results of the vector error correction model exhibit a long‐run bidirectional causal link between GDP and FDI for the selected SAARC nations except India. The test results show that there is a one‐way long‐run causal link from GDP to FDI for India.

This paper employed annual data to examine the causal nexus between FDI and economic growth. Therefore, researchers are encouraged to test the FDI‐growth relationship further by using quarterly data.

The SAARC nations should adopt effective policy measures that would substantially enlarge and diversify their economic base, improve local skills and build up a stock of human capital recourses capabilities, enhance economic stability and liberalise their market in order to attract as well as benefit from long‐term FDI inflows.

This paper would be immensely helpful to the policy makers of SAARC countries to plan their FDI policies in a way that would enhance growth and development of their respective economies.

This paper explores the evidence of a long-run co-movement between aggregate unemployment insurance spending and the labor force participation rate in the USA. The unemployment insurance (UI) program tends to expand during an economic downturn and contract during an expansion. UI may incentivize unemployment and may also facilitate better matching in the labor market. Statistical evidence of the presence of a co-movement will thus shed new light on their dynamics.

This research applies time-series econometric approach using monthly data from 1959:1 to 2020:3 to test threshold cointegration and estimate a threshold vector error-correction (TVEC) model. The estimates from the TVEC model investigating the nature of short-run dynamics.

The Enders and Siklos (2001) test find evidence of threshold cointegration between the two indicating the presence of long-run co-movement. The estimates from the TVEC model investigating the nature of short-run dynamics find evidence that the growth in aggregate UI spending and the growth in labor force participation rate adjust simultaneously to maintain the long-run co-movement above the threshold in the short run. The author also observes the same short-run dynamics for the growth in aggregate UI spending and the growth in the labor force participation rate for females.

This model is bi-variate by construction and does not address causality.

The author argues that the UI program positively impacts the female labor market outcomes, for example, better matching. This finding may explain the upward trend in the labor force participation rate for females in the USA.

The research findings may justify the transfer programs for minority and immigrants.

This is first research that analyzes the UI programs impact on the labor force participation using a macroeconometric approach. To the best of the author's knowledge, this is the first study in this genre.