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A Simple Estimator of Cointegrating Vectors in Higher Order Cointegrated Systems," Econometrica 61
, 1993
"... Efficient estimators of cointegrating vectors are presented for systems involving deterministic components and variables of differing, higher orders of integration. The estimators are computed using GLS or OLS, and Wald Statistics constructed from these estimators have asymptotic x2 distributions. T ..."
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Cited by 237 (3 self)
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Efficient estimators of cointegrating vectors are presented for systems involving deterministic components and variables of differing, higher orders of integration. The estimators are computed using GLS or OLS, and Wald Statistics constructed from these estimators have asymptotic x2 distributions. These and previously proposed estimators of cointegrating vectors are used to study longrun U.S. money (Ml) demand. Ml demand is found to be stable over 19001989; the 95 % confidence intervals for the income elasticity and interest rate semielasticity are (.88,1.06) and (.13,.08), respectively. Estimates based on the postwar data alone, however, are unstable, with variances which indicate substantial sampling uncertainty.
On Detectable and Nondetectable Structural Change
 Structural Change and Economic Dynamics
, 1999
"... A range of parameter changes in I(1) cointegrated time series are not reflected in econometric models thereof, in that many shifts are not easily detected by conventional tests. The breaks in question are changes that leave the unconditional expectations of the I(0) components unaltered. Thus, dynam ..."
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Cited by 16 (8 self)
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A range of parameter changes in I(1) cointegrated time series are not reflected in econometric models thereof, in that many shifts are not easily detected by conventional tests. The breaks in question are changes that leave the unconditional expectations of the I(0) components unaltered. Thus, dynamics, adjustment speeds etc. may alter without detection. However, shifts in longrun means are generally noticeable. Using the VECM model class, the paper discusses such results, explains why they occur, and uses Monte Carlo experiments to illustrate the contrasting ease of detection of `deterministic' and `stochastic' shifts. 1
Empirical Limits for Time Series Econometrics Models,” unpublished
, 1998
"... This paper characterizes empirically achievable limits for time series econometric modeling and forecasting. The approach involves the concept of minimal information loss in time series regression and the paper shows how to derive bounds that delimit the proximity of empirical measures to the true p ..."
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Cited by 14 (9 self)
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This paper characterizes empirically achievable limits for time series econometric modeling and forecasting. The approach involves the concept of minimal information loss in time series regression and the paper shows how to derive bounds that delimit the proximity of empirical measures to the true probability measure (the DGP) in models that are of econometric interest. The approach utilizes joint probability measures over the combined space of parameters and observables and the results apply for models with stationary, integrated, and cointegrated data. A theorem due to Rissanen is extended so that it applies directly to probabilities about the relative likelihood (rather than averages), a new way of proving results of the Rissanen type is demonstrated, and the Rissanen theory is extended to nonstationary time series with unit roots, near unit roots, and cointegration of unknown order. The corresponding bound for the minimal information loss in empirical work is shown not to be a constant, in general, but to be proportional to the logarithm of the determinant of the (possibility stochastic) Fisherinformation matrix. In fact, the bound that determines proximity to the DGP is generally path dependent, and it depends specifically on the type as well as the number of regressors. For practical purposes, the
A Note on Testing Exogeneity of Instrumental Variables (DRAFT PAPER)
, 1994
"... Introduction It is common in the literature on instrumental variables to remark upon the difficulty of knowing or demonstrating that a potential instrument is exogenous, in the sense of being uncorrelated with the disturbances [Bartels, 1991, Johnston, 1972]. It is also widely recognized that exoge ..."
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Cited by 4 (3 self)
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Introduction It is common in the literature on instrumental variables to remark upon the difficulty of knowing or demonstrating that a potential instrument is exogenous, in the sense of being uncorrelated with the disturbances [Bartels, 1991, Johnston, 1972]. It is also widely recognized that exogeneity is an assumption embedded in the model specification [Engle, et al, 1984], hence, it rests on subjective judgment and, like other structural assumptions of causation and "zerorestrictions", it cannot be tested in purely observational studies. The purpose of this note is to show that despite its elusive nature, exogeneity can nevertheless be given some empirical test. The test is not guaranteed to detect all violations of exogeneity but it can, in certain circumstances, screen away real bad choices of wouldbe instruments. 2 An Instrumental Inequality Definition 2.1 (exogeneity) A variable z is said to be exogenous relative to an ordered
Evaluating a Model by Forecast Performance
, 2003
"... Although outofsample forecast performance is often deemed to be the ‘gold standard’ of evaluation, it is not in fact a good yardstick for evaluating models. The arguments are illustrated with reference to a recent paper by Carruth, Hooker and Oswald (1998), who suggest that the good dynamic foreca ..."
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Cited by 4 (0 self)
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Although outofsample forecast performance is often deemed to be the ‘gold standard’ of evaluation, it is not in fact a good yardstick for evaluating models. The arguments are illustrated with reference to a recent paper by Carruth, Hooker and Oswald (1998), who suggest that the good dynamic forecasts of their model support the efficiencywage theory on which it is based. Journal of Economic Literature classification: C53.
Broad Money Demand and Financial Liberalization in Greece
 IMF Working Paper 96/62 38 Commission (1988), Research on the Costs of NonEurope: Basic Findings
, 1996
"... to stimulate discussion and critical comment. References in publications to International Finance Discussion Papers (other than an acknowledgment that the writer has This paper develops a constant, datacoherent, error correction model for broad money demand (M3) in Greece. This model contributes to ..."
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Cited by 3 (0 self)
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to stimulate discussion and critical comment. References in publications to International Finance Discussion Papers (other than an acknowledgment that the writer has This paper develops a constant, datacoherent, error correction model for broad money demand (M3) in Greece. This model contributes to a better understanding of the e®ects of monetary policy in Greece, and of the portfolio consequences of ¯nancial innovation in general. The broad monetary aggregate M3 was targeted until recently, and current monetary policy still uses such aggregates as guidelines, yet analysis of this aggregate has been dormant for over a decade. In spite of large °uctuations in the in°ation rate, introduction of new ¯nancial instruments, and liberalization of the ¯nancial system, the estimated model is remarkably stable. The dynamics of money demand are important, with price and income elasticities being much smaller in the short run than in the long run.
Contents
"... 2. Option Types.........................................................................................2 ..."
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2. Option Types.........................................................................................2
Granger Causality, Exogeneity, Cointegration, and Economic Policy Analysis
, 2010
"... Policy analysis has long been a main interest of Clive Granger’s. Here, we present a framework for economic policy analysis that provides a novel integration of several fundamental concepts at the heart of Granger’s contributions to timeseries analysis. We work with a dynamic structural system anal ..."
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Policy analysis has long been a main interest of Clive Granger’s. Here, we present a framework for economic policy analysis that provides a novel integration of several fundamental concepts at the heart of Granger’s contributions to timeseries analysis. We work with a dynamic structural system analyzed by White and Lu (2010) with well defined causal meaning; under suitable conditional exogeneity restrictions, Granger causality coincides with this structural notion. The system contains target and control subsystems, with possibly integrated or cointegrated behavior. We ensure the invariance of the target subsystem to policy interventions using an explicitly causal partial equilibrium recursivity condition. Policy effectiveness is ensured by another explicit causality condition. These properties only involve the data generating process; models play a subsidiary role. Our framework thus complements that of of Ericsson, Hendry, and Mizon (1998) (EHM) by providing conditions for policy analysis alternative to weak, strong, and superexogeneity. This makes possible policy analysis for systems that may fail EHM’s conditions. It also facilitates analysis of the cointegrating properties of systems subject to policymaker control. We discuss a variety of practical procedures useful for analyzing such systems and illustrate with an application to a simple model of the U.S. macroeconomy.
European University Institute,
"... The relationship between wages, prices, productivity, inflation, and unemployment in Italy, Poland, and the UK between the 1960’s and the early 1990’s is modelled as a cointegrated vector autoregression subject to regime shifts. For each of these economies there is clear evidence of a change in the ..."
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The relationship between wages, prices, productivity, inflation, and unemployment in Italy, Poland, and the UK between the 1960’s and the early 1990’s is modelled as a cointegrated vector autoregression subject to regime shifts. For each of these economies there is clear evidence of a change in the underlying equilibria of this sector of the economy. Hypotheses concerning the similarity of the transition from a rigid to a flexible labour market are tested.