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Book part
Publication date: 13 December 2013

Nikolay Gospodinov, Ana María Herrera and Elena Pesavento

This article investigates the robustness of impulse response estimators to near unit roots and near cointegration in vector autoregressive (VAR) models. We compare…

Abstract

This article investigates the robustness of impulse response estimators to near unit roots and near cointegration in vector autoregressive (VAR) models. We compare estimators based on VAR specifications determined by pretests for unit roots and cointegration as well as unrestricted VAR specifications in levels. Our main finding is that the impulse response estimators obtained from the levels specification tend to be most robust when the magnitude of the roots is not known. The pretest specification works well only when the restrictions imposed by the model are satisfied. Its performance deteriorates even for small deviations from the exact unit root for one or more model variables. We illustrate the practical relevance of our results through simulation examples and an empirical application.

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VAR Models in Macroeconomics – New Developments and Applications: Essays in Honor of Christopher A. Sims
Type: Book
ISBN: 978-1-78190-752-8

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Article
Publication date: 14 September 2015

Ioannis A Venetis and Paraskevi K Salamaliki

The purpose of this paper is to examine the time series behavior of Greek labor market series by providing an empirical perspective on trend breaks and unit roots. Trend…

Abstract

Purpose

The purpose of this paper is to examine the time series behavior of Greek labor market series by providing an empirical perspective on trend breaks and unit roots. Trend breaks represent aggregate behavior responses to “infrequent” changes in economic fundamentals, including changes in fiscal or labor market conditions, as have been perceived in Greece during the last years. Unit roots reveal whether “regular” shocks have significant effects on the level of the series over a specified finite horizon.

Design/methodology/approach

The authors employ recent procedures that deal with the “circular testing problem” between tests on the parameters of the trend function and unit root tests that often arises in empirical applications. These techniques assess trend function stability and are robust regardless of whether the noise component is stationary or having a unit root. Then, conditional on the presence of breaks, the authors test whether the series can be characterized by a stochastic trend.

Findings

The analysis provides evidence of “infrequent” trend breaks that appear to coincide with the recent global economic crisis and the implementation of the counteraction (fiscal) measures to the Greek debt crisis. Allowing for trend breaks does not lead to a rejection of the unit root hypothesis, which might reflect the low flexibility of the country’s labor market operation.

Practical implications

The procedures employed can be viewed as new tools that might help empirical researchers to explore more accurately the characteristics of individual time series and to find reasonable approximations to the true processes of the time series examined.

Originality/value

The paper provides new information on the presence of structural changes in the Greek labor market, and on whether the “aggressive” and “occasional” nature of fiscal measures can be approximated by infrequent changes in the slope of the trend function.

Details

Journal of Economic Studies, vol. 42 no. 4
Type: Research Article
ISSN: 0144-3585

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Book part
Publication date: 21 November 2014

Cheng Hsiao

This paper provides a selective survey of the panel macroeconometric techniques that focus on controlling the impact of “unobserved heterogeneity” across individuals and…

Abstract

This paper provides a selective survey of the panel macroeconometric techniques that focus on controlling the impact of “unobserved heterogeneity” across individuals and over time to obtain valid inference for “structures” that are common across individuals and over time. We consider issues of (i) estimating vector autoregressive models; (ii) testing of unit root or cointegration; (iii) statistical inference for dynamic simultaneous equations models; (iv) policy evaluation; and (v) aggregation and prediction.

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Essays in Honor of Peter C. B. Phillips
Type: Book
ISBN: 978-1-78441-183-1

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Book part
Publication date: 1 January 2004

Katarina Juselius

Abstract

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New Directions in Macromodelling
Type: Book
ISBN: 978-1-84950-830-8

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Article
Publication date: 13 March 2017

Bernard Njindan Iyke and Nicholas M. Odhiambo

The purpose of this paper is to examine the validity of the purchasing power parity (PPP) hypothesis for two Southern African countries, namely: Lesotho and Zambia.

Abstract

Purpose

The purpose of this paper is to examine the validity of the purchasing power parity (PPP) hypothesis for two Southern African countries, namely: Lesotho and Zambia.

Design/methodology/approach

The authors utilized four econometric tests to examine the existence of the PPP hypothesis in Lesotho and Zambia. These tests include two unit root tests without structural breaks – the Dickey-Fuller generalized least squares (DF-GLS) test and the Ng-Perron test; and two unit root tests with structural breaks – the Perron test and the Zivot-Andrews test. The authors’ empirical analysis is based on an annual data set with varying time periods. The sample period spanned 1960-2010 and 1955-2010, for Lesotho and Zambia, respectively.

Findings

The authors found that the PPP hypothesis was supported in the case of Lesotho, but rejected in the case of Zambia.

Originality/value

This paper is the first to simultaneously explore the exchange rate policies, trends, and the PPP for these two countries. The implication of this finding is that Lesotho is unlikely to profit immensely from trade and investment arbitrages; whereas Zambia is more likely to profit immensely from trade and investment arbitrage by trading with the USA. Moreover, the authors’ findings indicate that the PPP doctrine may be a useful guide for the exchange rate and other macroeconomic adjustment policies in Lesotho but not in Zambia.

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African Journal of Economic and Management Studies, vol. 8 no. 1
Type: Research Article
ISSN: 2040-0705

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Article
Publication date: 1 January 2012

Dorina Lazar and Michel Denuit

The purpose of this paper is to highlight some testing procedures, both in time/frequency framework, useful to test for significant cycles in insurance data. The US…

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Abstract

Purpose

The purpose of this paper is to highlight some testing procedures, both in time/frequency framework, useful to test for significant cycles in insurance data. The US underwriting cycle is measured using the growth rates of real premiums.

Design/methodology/approach

In addition to the traditional AR(2) model, two new approaches are suggested: testing for a significant peak in the periodogram using Fisher g test and a nonparametric version of it, and testing for unit root cycles in insurance data.

Findings

All approaches find empirical evidence for a cyclical behaviour of the growth rates of property‐liability real premiums. Results on the length of dominant cycle still diverge, according to the approach (time/frequency domain).

Originality/value

Compared to the existing literature, the present study innovates in that it highlights additional testing procedures, helpful to detect significant cycles in insurance time series. The underwriting cycle is analysed through the growth rates of real premiums.

Details

The Journal of Risk Finance, vol. 13 no. 1
Type: Research Article
ISSN: 1526-5943

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Article
Publication date: 12 June 2007

Luis A. Gil‐Alana

The purpose of the paper is to examine the seasonal structure in the German monetary aggregate M1 and output by means of fractional integration techniques.

Abstract

Purpose

The purpose of the paper is to examine the seasonal structure in the German monetary aggregate M1 and output by means of fractional integration techniques.

Design/methodology/approach

The authors use a version of the tests of Robinson that permits testing seasonal I (d) models with the possibility of incorporating seasonal dummy variables and structural breaks.

Findings

The results show that there is a strong degree of persistence in their behaviour, especially at the long run or zero frequency, with orders of integration ranging between 1.25 and 1.50.

Originality/value

The main innovation in this work is the use of a new time series approach to the case of seasonality.

Details

Studies in Economics and Finance, vol. 24 no. 2
Type: Research Article
ISSN: 1086-7376

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Book part
Publication date: 2 September 2019

Abstract

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The Impacts of Monetary Policy in the 21st Century: Perspectives from Emerging Economies
Type: Book
ISBN: 978-1-78973-319-8

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Article
Publication date: 26 October 2020

Ebru Çağlayan Akay, Zamira Oskonbaeva and Hoşeng Bülbül

This study aims to examine the hysteresis hypothesis in unemployment using monthly data from 13 countries in transition.

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1115

Abstract

Purpose

This study aims to examine the hysteresis hypothesis in unemployment using monthly data from 13 countries in transition.

Design/methodology/approach

Stationarity in the unemployment rate of selected transition economies was analyzed using four different group unit root tests, namely, linear, structural breaks, non-linear and structural breaks and non-linear.

Findings

The empirical results show that the unemployment hysteresis hypothesis is valid for the majority of transition economies, including Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, the Kyrgyz Republic, Latvia, Lithuania, Poland, Romania and Slovenia. However, the results strongly reject the null hypothesis of unemployment hysteresis for the Kazakhstan and the Slovak Republics.

Originality/value

This study revealed that, for countries in transition, advanced unit root tests exhibit greater validity when compared to standard tests

Details

Applied Economic Analysis, vol. 28 no. 84
Type: Research Article
ISSN: 2632-7627

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Article
Publication date: 26 February 2018

Vasudeva Murthy and Albert Okunade

This study aims to investigate, for the first time in the literature, the stochastic properties of the US aggregate health-care price inflation rate series, using the data…

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1149

Abstract

Purpose

This study aims to investigate, for the first time in the literature, the stochastic properties of the US aggregate health-care price inflation rate series, using the data on health-care inflation rates for a panel of 17 major US urban areas for the period 1966-2006.

Design/methodology/approach

This goal is undertaken by applying the first- and second-generation panel unit root tests and the panel stationary test developed recently by Carrion-i-Silvestre et al. (2005) that allows for endogenously determined multiple structural breaks and is flexible enough to control for the presence of cross-sectional dependence.

Findings

The empirical findings indicate that after controlling for the presence of cross-sectional dependence, finite sample bias, and asymptotic normality, the US aggregate health-care price inflation rate series can be characterized as a non-stationary process and not as a regime-wise stationary innovation process.

Research limitations/implications

The research findings apply to understanding of health-care sector price escalation in US urban areas. These findings have timely implications for the understanding of the data structure and, therefore, constructs of economic models of urban health-care price inflation rates. The results confirming the presence of a unit root indicating a high degree of inflationary persistence in the health sector suggests need for further studies on health-care inflation rate persistence using the alternative measures of persistence. This study’s conclusions do not apply to non-urban areas.

Practical implications

The mean and variance of US urban health-care inflation rate are not constant. Therefore, insurers and policy rate setters need good understanding of the interplay of the various factors driving the explosive health-care insurance rates over the large US metropolitan landscape. The study findings have implications for health-care insurance premium rate setting, health-care inflation econometric modeling and forecasting.

Social implications

Payers (private and public employers) of health-care insurance rates in US urban areas should evaluate the value of benefits received in relation to the skyrocketing rise of health-care insurance premiums.

Originality/value

This is the first empirical research focusing on the shape of urban health-care inflation rates in the USA.

Details

Journal of Economics, Finance and Administrative Science, vol. 23 no. 44
Type: Research Article
ISSN: 2077-1886

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