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Purpose: The Polish economy has undergone major challenges and changes over the past few decades. The country's trade flows, in particular, have become more firmly tied to the country's Western neighbors as they have grown in volume. This study examines Poland's trade balances in ten Standard International Trade Classification (SITC) sectors versus the United States of America, first testing for and isolating structural breaks in each time series. These breaks are then included in a set of the cointegration models to examine their macroeconomic determinants. Design/methodology/approach: Linear and nonlinear and nonlinear autoregressive distributed lag models, both with and without dummies corresponding to structural breaks, are estimated. Findings: One key finding is that incorporating these breaks reduces the significance of the real exchange rate in the model, supporting the hypothesis that this variable already incorporates important information. It also results in weaker evidence for cointegration of all variables in certain sectors. Research limitations/implications: This study looks only at one pair of countries, without any third-country effects. Originality/value: An important country pair's trade relations is examined; in addition, the real exchange rate is shown to incorporate economic information that results in structural changes in the economy. The paper extends the existing literature by conducting an analysis of Poland's trade balances with the USA, which have not been studied in such a context so far. A strong point is a broad methodology that lets compare the results the authors obtained with different kinds of models, both linear and nonlinear ones, with and without structural breaks. [ABSTRACT FROM AUTHOR]

This paper investigates two different interpretations of the same empirical finding that long-term market rates Granger cause policy-controlled rates. Pollin (1991) interprets the finding in the usual manner (the structural position). Moore (1991) interprets the causality relationship in reverse (the accommodative position). This paper derives the term structure of CD rates. Then, using CD rates, it provides empirical evidence that appears consistent with Moore's interpretation. In addition, the causality relationship between long-term bond yields and the federal funds rate is examined. The results are consistent with the accommodative position under the assumption of the expectations theory of the term structure. [ABSTRACT FROM AUTHOR]

This paper hypothesizes that the structure of macroeconomic governance with its financial and non-financial dynamics is, among other things, a key determinant of economic performance, taking the case of the United States from 1952Q1 to 2018Q4. The paper tests its hypothesis by developing three modes of macroeconomic governance based on complementarities and a time-series model to be used for the empirical analysis of these modes and by using a linear and nonlinear Autoregressive Distributed Lag cointegration model. In so doing, the paper compares five periods between 1952Q1 and 2018Q4 using the same time-series model to illustrate how the changing structure of macroeconomic governance affects long-term economic performance over time. The paper reaches three conclusions. First, higher economic performance in 1952Q1–1968Q3 originates in, among other things, a systemic mode of macroeconomic governance. Second, lower economic performance in the three sub-periods between 1968Q4 and 2008Q2 is due to a fragmented mode of macroeconomic governance. Third, the sharp decline in economic performance in 2008Q3–2018Q4 originates in the outbreak and deepening of a structural trap due to long-run structural fragmentation. [ABSTRACT FROM AUTHOR]

Purpose The purpose of this paper is to explore the effects of total assets, stock performances, CEOs’ tenures, ages, and board sizes on total CEO compensations of 249 publicly listed US companies over a nine-year period from 2004-2012.Design/methodology/approach Pedroni’s panel cointegration, generalized method of moments, and dynamic ordinary least squares methodologies are applied.Findings All variables are non-stationary in log-levels. The findings show significant positive effects of total assets and stock performances on total CEO compensations. The effects of CEO’s tenure and age as well as board size on total CEO compensation deem negative. However, short-run net interactive feedback effects are generally positive with some exceptions.Research limitations/implications The above variables matter in rewarding the CEOs. They should be carefully weighed in for proper formulation of CEO compensation policy.Originality/value This paper applies relatively new econometric tools for a large panel data set. This work considers some new variables for determining CEO compensation in USA. The findings are relatively new with empirical originality. [ABSTRACT FROM AUTHOR]

This paper observes effect of money supply on the stock market through the portfolio balance channel as a transmission mechanism of monetary policy. National flow of funds accounts, specifically assets from US households' portfolios, represent a key data source. Johansen's cointegration methodology is employed in the empirical part of the paper to analyze both short term and long term relationships among researched variables. Estimates of vector error correction model help to reliably quantify intensity of the effect. Results show money supply excercises influence on valuation of S&P 500 index with 6 months lag. The impact is also distinguishable in the long run, whereas all observed asset classes can positively influence price of S&P 500. Findings are then contextualized in the concluding part of the paper using a monetary policy framework. [ABSTRACT FROM AUTHOR]

The concept of fiscal sustainability has become increasingly used over the last 20 years. However, much of the literature on fiscal sustainability at the sub-national level ignores the role of intergovernmental fiscal relations. To address this gap, this paper discusses a sufficient condition for sub-national fiscal sustainability and examines the importance of intergovernmental aid in determining that sustainability. Using panel data of counties and municipalities in the US, and using unit root and cointegration analytic techniques, this paper finds different levels of fiscal sustainability between counties and municipalities. We also find that intergovernmental aid plays an important role for fiscal sustainability for both counties and municipalities. [ABSTRACT FROM AUTHOR]

This paper investigates theoretical implications from a new Keynesian model focusing on the labor market, by imposing them as testable restrictions in an estimated vector error correction model on US data from 1982Q3 to 2016Q1. By this, I conduct an important, but rarely addressed, step in assessing the empirical relevance of a theoretical new Keynesian model. Another advantage of this approach is that the cycle and trend components of the data are separated when imposing the testable restrictions, such that there is no need to filter the data series prior to estimation. The results show that most of the properties pertaining to the theoretical model cannot be rejected when imposed as restrictions. The new Keynesian model on the labor market is thus found to be empirically relevant. Furthermore, the estimated econometric model explains a large degree of the wage and price dynamics in the USA, such that the paper also provides an estimated macroeconometric model. [ABSTRACT FROM AUTHOR]

Many papers in the housing literature treat the intertemporal evolution of the logarithm of US real house prices as a unit root process. They also study the cointegration relationship among the logarithm of real house prices and fundamental economic variables such as income and they apply an error correction specification for modeling and forecasting real house prices. This paper argues that the logarithm of US real house price is not a unit root process. Instead, the evidence from a 120-year national dataset and metro area level and state level panel data sets supports the notion that US house prices are trend stationary. One result of this conclusion is that the validity of analyses of US house prices based on cointegration and error correction models needs to be reconsidered. [ABSTRACT FROM AUTHOR]

In this article the effect of defense spending on aggregate output is discussed. Recent publications in this area are reviewed and new additional evidence is provided. The findings presented in this paper are supportive of the positive effect of defense spending. However, in light of the contrary evidence presented in other papers, empirical evidence taken as a whole, suggests that a definitive conclusion about the effect of defense spending at this time should be avoided. [ABSTRACT FROM AUTHOR]

In the United States, health economists, experts in population studies, and policy makers seek to understand the important factors that augment life expectancy. This paper attempts to identify empirically effects of some major determinants on life expectancy in the United States during the period 1960-2012. Recently developed powerful methods of unit root testing and cointegration analysis, Carrion-i-Silvestre et al. Economet Theor, 25, 1754-1792, (2009), Perron and Yabu J Bus Econ Stat, 27, 369-96, (2009), Kejriwal and Perron J Econ, 146(1), 59-73, (2008), Kejriwal and Perron J Bus Econ Stat, 28(4), 503-522, (2010a), and Maki Econ Model, 29(5), 2011-2015, (2012) that allow for the presence of structural shifts, are employed. The papers’ findings reveal that the level of real per capita income and the level of educational attainment are the factors that affect the level of life expectancy most. Other factors such as the level of real health expenditure per capita and any measure of income inequality, although important, were found to be highly collinear with real per capita income. The policy implications of the results of the paper are discussed. [ABSTRACT FROM AUTHOR]

This paper investigates the degree of market integration between several product forms of US wild salmon and Norwegian farmed salmon. While several studies have investigated the link between farmed salmon and fresh and/or frozen wild salmon markets, we expand the literature with the inclusion of the products canned salmon and salmon roe. Understanding how canned salmon and salmon roe are related to the broader salmon market is of importance to US fisheries, as these products are high-price exports for the United States. Our results find evidence of cointegration between the Norwegian farmed salmon market and all US salmon products. Domestic and international economic conditions, such as production technological advances within farmed salmon production, environmental challenges, and changes in trade regulations, which affect the market for farmed salmon, will hence also influence US prices of frozen and canned salmon, as well as salmon roe. [ABSTRACT FROM AUTHOR]

In this paper, we analyse the demand for real money balances in the United States for the period 1990Q1–2017Q2 using a novel Divisia monetary aggregate developed by Barnett et al. (2013). Unlike simple-sum aggregates, Divisia aggregates take into account the different degrees of 'moneyness' of each monetary asset. In addition, Divisia aggregates have shown to be empirically superior to simple-sum aggregates, providing stable money demand functions for different periods and countries. In a first stage, we test for cointegration and estimate a long-run equilibrium model. In a second stage, we estimate an error correction model to study the short-run dynamics. Consistent with previous research, our findings show the existence of a stable money demand function, which suggests that monetary aggregates, when properly measured, can be useful tools in the conduct of monetary policy. [ABSTRACT FROM AUTHOR]

This paper presents a long-run study of the relationship between autonomous and induced demand for the United States. Our exercise can be considered a contribution to the burgeoning literature revolving around autonomous demand-led growth models, which have displayed the potential to establish bridges not only within the post-Keynesian community, but also between post-Keynesian economics and other evolutionary and pluralistic approaches to economic growth. In particular, we study the long-run dynamic relationship between autonomous demand – which comprises R&D expenditures, government spending, exports and residential investment – and induced demand. Through a cointegration model with quantile-varying coefficients, we account for the possibility of changes in the relationship between the two variables and demonstrate that the long-run equilibrium relationship between autonomous and induced demand is robust to exogenous shocks and changes in the parameters. [ABSTRACT FROM AUTHOR]

Several studies have tested semi-endogenous versus Schumpeterian growth models using different methodological approaches. This paper critically reviews these studies including their approaches and provides new evidence on this issue, by analyzing both time-series data from the United States and panel data from 19 OECD countries over the period 1980–2014. The review finds much support for Schumpeterian growth theory, but shows that all studies reviewed have several limitations. These limitations include conceptual problems associated with the use of the number/stock of patents as a measure of the flow/stock of knowledge, the possibility of spurious regressions due to non-stationary data, potential mismeasurement of R&D inputs due to possible interpolation and deflation errors, misspecification problems that can arise in difference models when variables are cointegrated, and potential spurious rejections of the unit root hypothesis for R&D intensity when the lag length in unit root tests is too small. The present study avoids these limitations and finds strong evidence in favor of semi-endogenous growth. [ABSTRACT FROM AUTHOR]

This paper extends the buffered autoregressive model to the buffered vector error-correction model (VECM). Least squares estimation and a reduced-rank estimation are discussed, and the consistency of the estimators on the delay parameter and threshold parameters is derived. We also propose a supWald test for the presence of buffer-type threshold effect. Under the null hypothesis of no threshold, the supWald test statistic converges to a function of Gaussian process. A bootstrap method is proposed to obtain the p-value for the supWald test. We investigate the effectiveness of our methods by simulation studies. We apply our model to study the monthly Federal bond rates of United States. We find the evidences of buffering regimes and the asymmetric error-correction effect. [ABSTRACT FROM AUTHOR]

This paper develops a model in which the interaction of Seniority of the C.E.O in the enterprise and the debt can be analyzed. Multiple securities arise as optimal in the model. This allows for a meaningful analysis of interaction effects between Seniority of the C.E.O in the enterprise and the debt for a panel of USA firms from 2000 to 2009. There is a predicted (positive) relationship between Seniority of the C.E.O in the enterprise and the debt. Finally, this paper uses the recent developments in the econometrics of non-stationary dynamic panels to reassess the relationship between Seniority of the C.E.O in the enterprise and the debt. [ABSTRACT FROM AUTHOR]

It is widely agreed in empirical studies that allowing for potential structural change in economic processes is an important issue. In existing literature, tests for cointegration between time series data allow for one regime shift. This paper extends three residual-based test statistics for cointegration to the cases that take into account two possible regime shifts. The timing of each shift is unknown a priori and it is determined endogenously. The distributions of the tests are non-standard. We generate new critical values via simulation methods. The size and power properties of these test statistics are evaluated through Monte Carlo simulations, which show the tests have small size distortions and very good power properties. The test methods introduced in this paper are applied to determine whether the financial markets in the US and the UK are integrated. [ABSTRACT FROM AUTHOR]

Abstract: As in international tests of purchasing power parity, panel unit root tests have been successful in rejecting a unit root process in U.S. city relative prices over the period 1918–1997. However, there is an empirical question of what the rejection of a ‘panel unit root’, particularly with respect to real exchange rates, means. This paper employs a variety of univariate unit root and cointegration tests which have recently come to the fore. These tests improve the power and reduce size distortion found in standard unit root and cointegration tests such as the Dickey–Fuller and Phillips–Perron tests. I find considerable evidence for rejecting a unit root process in the majority of U.S. city relative prices over the entire sample period and two subperiods. Less successful are stationarity tests conducted on regions of the U.S. [Copyright &y& Elsevier]

This paper first aims to reinvestigate the issue of US fiscal sustainability by using the quantile cointegration approach proposed by Xiao (2009 and 2012). Our empirical evidence indicates a quantile-dependent cointegrating relationship between government expenditures and revenues. In addition, this paper examines the long-run causality relationship between expenditures and revenues by using the vector error-correction (VEC) model with coefficients based on the different quantiles. Findings from the long-run Granger-causality analyses support the spend-and-tax hypothesis. Our investigation suggests that the government should show more discretion in increasing expenditures in the long run. Moreover, budget deficit reduction can only be achieved through reductions in government expenditures. [ABSTRACT FROM AUTHOR]

Hurricane Katrina (2005) was the most devastating natural disaster in US history since San Francisco in 1906. A budding literature on disasters and trade suggests that while the impact of natural disasters on small and/or developing countries is significant, the effects on developed countries is not significant. This paper adds to the literature by focusing on a single event for a developed country, the US. In so doing, the aggregation problems of panel studies of many disasters over many countries is avoided. The results suggest that while terrible, Katrina's effect on US imports was not statistically significant. Estimates of the long-run cointegrating relationship of import demand detected neither the presence of extraordinarily more nor less imports during the period studied (1983:1 to 2008:2). Small, short-run decreases, then increases, can be attributed to the direct effect of a small decline in overall economic activity alone. Recent estimates for income and price elasticities are also obtained and the results compared to other recent shocks, namely, the mild recession of 1990-1991 and the recession and trade collapse in 2008. [ABSTRACT FROM AUTHOR]

The purpose of this study is to explore the nature of the association and the possible existence of a shortrun and long-run relationship between the stock-market indices of South Africa, India and the USA. The idea behind this combination is to know how the stock markets of these three prominent countries are related to each other. The study employs monthly data from the stock indices, namely JALSH (South Africa), NIFTY (India) and NASDAQ (USA) composite from April 2004 to March 2014. After testing for the normality of the data distribution and the stationarity of the time series data, this paper discovered a strong correlation between the stock market indices of South Africa, India and the USA. The correlation among the stock markets is high, particularly between South Africa and India. In addition, the paper attempts to discover the presence of any predictive ability among these markets by applying the Granger causality test. The result indicates that the NASDAQ index has no predictive ability as far as the JALSH and NIFTY indices are concerned. However, the JALSH index has a predictive ability on the NIFTY index. After testing the Granger cause relationship, the existence of a long-run and short-run relationship is tested. The long-run relationships among the stock market indices are analysed, following the Johansen and Juselius multivariate cointegration approach. The result suggests the absence of a long-run relationship among the three stock market indices. Short-run relationship is investigated with the Vector Autoregression (VAR) model, and the outcome obtained shows that both the USA and the South African stock markets are predicted only by their own past lags. However, the Indian stock market is seen to be a function of its own past lags and the past lags of the South African stock index. [ABSTRACT FROM AUTHOR]

This paper applies annual data from 1962 to 2011 to investigate the long run relationship between government spending and Gross Domestic Product (GDP). The common approach only considers defense government spending to estimate the multiplier to overcome the identification problem and endogeneity in isolating the effect of changes in government spending on GDP, I use the Autoregressive Distributed Lag (ARDL) approach to cointegration, which works despite having endogenous regressors to estimate the spending multiplier. The results confirm that government spending can be treated as a 'long-run forcing' variable for the explanation of real GDP and the long-run multiplier is found to be 1.94. [ABSTRACT FROM AUTHOR]

This paper examines the symmetric and asymmetric effects of house price changes and a few other macroeconomic variables on durable and non-durable consumption separately. The study considers the nonlinear panel Autoregressive Distributed Lag (ARDL) approach (Pooled Mean Group (PMG) estimation (Pesaran, 1997; Pesaran et al., 1999)) for cointegration and error-correction modeling, and uses annual data from fifty states of the U.S. The results show that changes in house prices have asymmetric effects on both durable and non-durable consumption in the long run. To dig deeper into the relationship between house price and consumption, I divide the fifty U.S. states into three categories: high-, middle- and low-income states. This helps to examine how the responsiveness of durable and non-durable consumption varies across these three categories. The findings show that the low-income states are affected more by changes in house prices than that of the high- and middle-income states. [ABSTRACT FROM AUTHOR]

This paper studies the dynamic interactions of the ethanol, crude oil and corn market prices in the United States from January 2005 up to December 2014. The empirical analysis, for the shake of robustness, employs alternative time series methodologies based on single equation and system estimation approaches to cointegration and more specifically, the autoregressive distributed lags and the Johansen ML cointegration methodologies were applied complementary. The findings reveal a statistically significant long-run causal effect running from crude oil and corn prices to ethanol price as well as from ethanol and corn prices to crude oil price. Additionally, a positive relationship between crude oil price and ethanol price was revealed. [ABSTRACT FROM AUTHOR]

China and Germany are comparable in terms of having persistent trade surplus with the USA, but they differ in how their currencies are valued. By invoking the China–Germany comparison, this paper finds that there is weak, if any, statistical association between the US trade deficit and the exchange rate. This finding is robust to long-run vs. short-run horizon, without vs. with an instrumental variable, and in-sample fitting vs. out-of-sample forecasting. This paper predicts that the US trade deficits with China and Germany will continue to rise in the presence of a recovery in the US economy. [ABSTRACT FROM AUTHOR]

The relation between China's RMB exchange rate and US real economy has recently become a hotly debated issue among scholars, researchers, and policymakers. Using monthly data from Nov. 2001-Nov. 2010, this paper employs the cointegration test and VECM model to capture the relationships among the Chinese RMB exchange rate, US-China bilateral trade, and the US unemployment rate. Results indicate that the US unemployment rate is negatively correlated with the RMB exchange rate. Impulse response analysis discloses the transmission mechanism of RMB appreciation: an appreciation of the RMB leads to a drop in US-China bilateral trade, which associates with a slight rise in the US unemployment rate. A potential explanation for these unconventional results lie in the complementary industrial structures between the two countries. Some policy suggestions are made at the end. [ABSTRACT FROM AUTHOR]

The paper reflects on the phenomenon of the liquidity trap in the U.S. during 2008- financial crisis. The modern history of economics indentyfied strictly only one such a case: Japan since mid - 1990s. The main focus is to collect evidence on the liquidity trap using both: monetary approach and Neo-keynesian. Standard Johansen cointegration anlaysis is used to catch the structural macroeconomic change since the Lehman Bros, collapse. Findings provide the evidence for: a) money demand function change due to zero-bond policy; b) the role of expectations in the liquidity trap condition; c) excessive raise of 'lemon cost on the financial intermediation market. [ABSTRACT FROM AUTHOR]

This paper reexamines the empirical performance of monetary exchange rate models for the dollar/yen exchange rate. We focus on the character of a potential long-run relationship between exchange rates and fundamentals. Using monthly data from 1976:01 to 2007:12 this paper applies a novel time-varying coefficient approach which allows a distinction between breaks in the cointegration vector and instabilities in the adjustment coefficients. We are able to show that most of the observed breakpoints can be traced back to major policy changes or specific economic developments. Our findings also show that macroeconomic fundamentals do matter for the U.S. dollar/Japanese yen exchange rate, but in different ways over different periods of time. [ABSTRACT FROM AUTHOR]

This paper develops tests for the null hypothesis of cointegration in the nonlinear regression model with I (1) variables. The test statistics we use in this paper are Kwiatkowski, Phillips, Schmidt, and Shin's (1992; KPSS hereafter) tests for the null of stationarity, though using other kinds of tests is also possible. The tests are shown to depend on the limiting distributions of the estimators and parameters of the nonlinear model when they use full-sample residuals from the nonlinear least squares and nonlinear leads-and-lags regressions. This feature makes it difficult to use them in practice. As a remedy, this paper develops tests using subsamples of the regression residuals. For these tests, first, the nonlinear least squares and nonlinear leadsand- lags regressions are run and residuals are calculated. Second, the KPSS tests are applied using subresiduals of size b. As long as b/T → 0 as T → ∞, where T is the sample size, the tests using the subresiduals have limiting distributions that are not affected by the limiting distributions of the full-sample estimators and the parameters of the model. Third, the Bonferroni procedure is used for a selected number of the subresidual-based tests. Monte Carlo simulation shows that the tests work reasonably well in finite samples for polynomial and smooth transition regression models when the block size is chosen by the minimum volatility rule. In particular, the subresidual-based tests using the leads-and-lags regression residuals appear to be promising for empirical work. An empirical example studying the U.S. money demand equation illustrates the use of the tests. [ABSTRACT FROM AUTHOR]

The paper analyses the cointegration relationships and the causal links between the exchange rate of the US Dollar, on the one side, and different price indices of US products on the other side. Data are of monthly frequency and cover a period of two or three decades. We show that the exchange rate cointegrate with the Consumer Price Index and with the prices indices of several agricultural, manufactured and service goods; moreover a one-direction causal link is present, running from price to exchange rate. On the opposite, cointegrating relationships between exchange rate and price indices do not exist in the case of recreational products with "cultural" content. Tentative theoretical explanations are proposed. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of this paper is to examine the nexus between Asian and the US short-term financing rates and compare them between pre- and post-Asian financial crisis. Design/methodology/approach: The short-term financing rate is used in the estimation by employing two-stage cointegration test. Findings: The result of the empirical study shows several outcomes; the short-term financing rates among the selected Asian countries are not highly correlated during pre-crisis period, but the rates become strongly associated during the post-crisis period. The US financing rate has significant influence on the Asian rate during both periods. Asian financing rates are not integrated by the influence of the USA, rather regional cooperation and financial initiatives lead the regional financing rate to be integrated. Originality/value: The empirical finding of the study offers significant policy implications for strengthening regional economic bonding and developing the financial systems. [ABSTRACT FROM AUTHOR]

In this paper, by using a combination of long-run and short-run restrictions, we identify a small structural VECM which includes inflation, unemployment and the federal funds rate and study the dynamic interactions at different frequencies among these variables. Our results show that: (a) in accordance with the traditional view of economic fluctuations, aggregate demand shocks and monetary policy shocks push inflation and unemployment in opposite directions in the short run; (b) the permanent supply shock explains the long-run movement of inflation and unemployment. These conclusions are at odds with the prediction of “natural-rate” models but are consistent with the idea of a propagation mechanism which links productivity shocks to inflation and unemployment at medium and low frequencies. Thus, with respect to some recent studies (e.g. Beyer and Farmer, ECB Working Paper 121, , and Ireland, J Monet Econ 44:279–291, ), we offer a different interpretation of the low-frequency comovements between inflation and unemployment characterizing the US economy in the last decades. [ABSTRACT FROM AUTHOR]

This paper investigates the econometric properties of the Taylor (1993) rule applied to US, Australian and Swedish data to judge its empirical relevance. Unit root tests indicate that the variables in the Taylor rule are near integrated processes, implying that cointegration is a necessary condition both for consistent estimation of the parameters of the model and compatibility between the model and the data. Tests find little support for cointegration and, together with an out-of-sample forecast exercise, suggest that we should have serious doubts about the Taylor rule as a reasonable description of how monetary policy is presently conducted. Parameters in Taylor rule regressions are therefore likely to be inconsistently estimated, and caution should be taken before central bank policy is evaluated using such methods. [ABSTRACT FROM AUTHOR]

The aim of this paper is to study the concept of separability in multiple nonstationary time series displaying both common stochastic trends and common stochastic cycles. When modeling the dynamics of multiple time series for a panel of several entities such as countries, sectors, firms, imposing some form of separability and commonalities is often required to restrict the dimension of the parameter space. For this purpose we introduce the concept of common feature separation and investigate the relationships between separation in cointegration and separation in serial correlation common features. Loosely speaking we investigate whether a set of time series can be partitioned into subsets such that there are serial correlation common features within the sub-groups only. The paper investigates three issues. First, it provides conditions for separating joint cointegrating vectors into marginal cointegrating vectors as well as separating joint short-term dynamics into marginal short-term dynamics. Second, conditions for making permanenttransitory decompositions based on marginal systems are given. Third, issues of weak exogeneity are considered. Likelihood ratio type tests for the different hypotheses under study are proposed. An empirical analysis of the link between economic fluctuations in the United States and Canada shows the practical relevance of the approach proposed in this paper. [ABSTRACT FROM AUTHOR]

Purpose – The purpose of this paper is to investigate four possible asymmetries in US aggregate consumption and its major components (durables, non-durables, and services) for the period 1990-2013. Understanding the asymmetric behavior of the components is important since the impact of monetary policy on separate consumer spending categories may differ substantially. Design/methodology/approach – The authors first employ stationarity and cointegration tests to specify and estimate the long-run equilibrium relationship between consumer spending and such variables as disposable income, consumer sentiment, and the expected real interest rate. The authors then specify a structural error-correction model for each spending category to simultaneously investigate such possible asymmetries due to the ratchet effect, psychological negativity bias, interest rate effect, and varying degree of adjustment in eliminating disequilibrium defined as the gap between actual and desired spending. Findings – First, consumption and its major components all display asymmetric behavior consistent with psychological negativity bias. Second, consumer spending on durable goods also displays asymmetries consistent with both the ratchet effect and the interest rate effect. Third, non-durables respond asymmetrically to disequilibrium; consumers adjust (increase) spending on non-durables only when actual spending is below desired spending on non-durable goods. Fourth, services also respond asymmetrically to disequilibrium; consumers adjust (reduce) spending on services only when actual spending is above desired spending on services. Originality/value – This study provides new insight on the asymmetric behavior of consumer spending. The authors believe that the findings should help with macroeconomic policymaking when such indicators as income, consumer sentiment, and expected real interest rates display significant variations. [ABSTRACT FROM AUTHOR]

Abstract--This paper seeks to understand the recent history of U.S. external imbalances by identifying the "long-run tendency' of the U.S. current account balance and investigating its behavior. The procedure that is adopted is to estimate cointegrating regressions between U.S. exports and imports of goods and services. Estimates from cointegrating regressions between several measures of U.S. exports and imports show that up to about the end of 1983 the U.S. current account tended toward zero. Since that time, there has been an apparent structural shift resulting in a long-run tendency for a deficit in excess of $100 billion per year. [ABSTRACT FROM AUTHOR]

This paper, first, estimates the appropriate, log-log or semi-log, linear long-run money-demand relationship capturing the behavior US money demand over the period of 1980:Q1-2010:Q4, using the standard linear cointegration procedures found in the literature, and the corresponding nonparametric version of the same based on projection pursuit regression (PPR) methods. We then, compare the resulting welfare costs of inflation obtained from the linear and nonlinear money-demand cointegrating equations. We make the following observations: (i) the appropriate money-demand relationship for the period of 1980:Q1-2010:Q4 is captured by a semi-log function; (ii) based on the estimation of semi-log cointegrating equations, the welfare cost of inflation was found to at the most lie between 0.0131 % of GDP and 0.2186 % of GDP for inflation rates between 0 and 10 %, and; (iii) in comparison, the welfare cost of inflation obtained from the semi-log non-linear long-run money-demand function, derived using the PPR method, for 0-10 % of inflation ranges between 0.4930 and 1.9468 % of GDP. However, the standard errors associated with the welfare cost estimates obtained from PPR relative to the linear models tend to indicate that the nonlinear money demand provides more precise estimates of the welfare costs primarily for higher rates of inflation. [ABSTRACT FROM AUTHOR]

Cohesive markets for pine sawtimber and pine pulpwood were identified across regions in the southeastern United States. Data were provided by TimberMart-South (TMS) and included 40 years of quarterly prices across 22 regions in 11 states. Markets were determined using the law of one-price cointegration while accounting for endogenous structural breaks. The resulting markets for pine pulpwood resulted in one major market spanning from northern Georgia to southern Texas (seven TMS regions) and four markets made up of two TMS regions. Pine sawtimber markets could be interpreted as nine minimarkets or six markets that were driven by three independent markets made up of the largest mill-capacity regions. Compared to earlier studies, the markets were more fractured. The timing of the endogenous breaks was consistent across regions. [ABSTRACT FROM AUTHOR]

This paper evaluates the relationship among the NYMEX futures prices for crude oil, unleaded gasoline, heating oil and the US trade-weighted exchange rate. The motivation is to update and extend the literature in an attempt to determine the relationship between the US exchange rate and energy prices. In addition, the causal relationships among the energy futures prices are examined. Cointegration is detected among the variables, but contrary to the existing empirical literature, it is found that the US exchange rate can be excluded from the cointegrating space. The Granger causality tests and impulse response functions also indicate that the US exchange rate is not related to the energy prices. The recursive cointegration analysis reveals that the relationship between the US exchange rate and the energy futures prices has faded across time. [ABSTRACT FROM AUTHOR]

This paper examines the long-term linkages between seven Central and Eastern European (CEE) emerging stock markets and two developed stock markets, namely the German and the US markets. The stability of the long-run relationships is studied using recursive cointegration analysis. The results reveal that the financial linkages between the CEE markets and the world markets increased with the beginning of the EU accession process. Furthermore, the application of the Gonzalo and Granger (J Bus Econ Stat 13:27–35, 1995) methodology indicates that the examined stock markets are partially integrated, while there is also evidence that the emerging stock markets of Central and Eastern Europe except for Estonia together with the German and the US stock markets, have a significant common permanent component, which drives this system of stock exchanges in the long run. Finally, it is worthwhile to note that the global financial crisis of 2007–2009 caused a slowdown in the convergence process. In addition we find evidence that the Slovenian stock market exhibits a moderate increase in the transitory component and this may be attributed to the Slovenian full membership in the euro area. [ABSTRACT FROM AUTHOR]

We study model-driven statistical arbitrage in US equities. Trading signals are generated in two ways: using Principal Component Analysis (PCA) or regressing stock returns on sector Exchange Traded Funds (ETFs). In both cases, the idiosyncratic returns are modelled as mean-reverting processes, which leads naturally to 'contrarian' strategies. We construct, back-test and compare market-neutral PCA- and ETF-based strategies applied to the broad universe of US equities. After accounting for transaction costs, PCA-based strategies have an average annual Sharpe ratio of 1.44 over the period 1997 to 2007, with stronger performances prior to 2003. During 2003-2007, the average Sharpe ratio of PCA-based strategies was only 0.9. ETF-based strategies had a Sharpe ratio of 1.1 from 1997 to 2007, experiencing a similar degradation since 2002. We also propose signals that account for trading volume, observing significant improvement in performance in the case of ETF-based signals. ETF-strategies with volume information achieved a Sharpe ratio of 1.51 from 2003 to 2007. The paper also relates the performance of mean-reversion statistical arbitrage strategies with the stock market cycle. In particular, we study in detail the performance of the strategies during the liquidity crisis of the summer of 2007, following Khandani and Lo [Social Science Research Network (SSRN) working paper, 2007]. [ABSTRACT FROM AUTHOR]

This paper examines the growth impact of digital capital in the US and the EU-15 countries from a long-run perspective. It estimates the elasticity of output with respect to Information and Communication Technology (ICT) within a production function framework, by means of a panel cointegration analysis. ICT capital is found to significantly spur GDP growth over time, and above its income share. This sharply contrasts with existing aggregate evidence, and with the view that the growth impact of this factor is confined to the contribution given to the productivity resurgence of the 1990s. [ABSTRACT FROM AUTHOR]

In this paper, we examine the relationship between the US government expenditures and revenues using a fractional cointegration framework. In doing so, we permit a much richer degree of flexibility in the dynamic adjustment process toward equilibrium than in the classical case of cointegration. Moreover, we relax the assumption of a symmetric adjustment process throughout the use of threshold autoregressive (TAR) and momentum threshold autoregressive (M-TAR) models in the error correction representation of the process. The results show that both individual series are non-stationary I(1) and we do not find evidence of cointegration of any degree. However, if we take into account a structural break at 1973(2), fractional cointegration is found if the underlying process is autocorrelated, especially in the asymmetric modeling. [ABSTRACT FROM AUTHOR]

This paper examines if the Indian stock market moves with other markets in Asia and the United States in an era of capital market reforms and the sustained interest of foreign investors in that market. By using techniques of cointegration, vector autoregression, vector error-correction models, and Granger causality, we find that, though there is definite information leadership from the U.S. market to all Asian markets, the U.S. indexes do not uniquely influence the integration of Asian markets, while Japan is found to play a unique role in the integration of Asian markets. The U.S. market is seen not only to influence, but also to be influenced by information from most of the major Asian markets. The Indian stock return in recent times is definitely led by major stock index returns in the United States, Japan, as well as other Asian markets, such as Hong Kong, South Korea, and Singapore. More important, returns on the Indian market are also seen to exert considerable influence on stock returns in major Asian markets. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to re-examine the issue of whether inter-urban housing markets can be modelled using a set of common economic fundamentals (such as economic growth, employment and the like). This is a timely analysis in view of the current widespread interest in housing markets as a result of the fall-out from the housing sub-prime crisis in the United States. House prices and economic fundamentals within each city are tested for cointegration and, in the event of a cointegrating relationship being found, restriction tests are applied to ascertain whether particular economic fundamentals can be excluded from the long-run equilibrium house price model for that city, and whether the given fundamental contributes to speed of adjustment back to equilibrium once a disturbance has taken place. This allows a test of whether the given factor/s can be considered a long-run driver/s of house prices in each city. The main finding is that there are clear differences across Australian state capitals in long-run driving factors for house prices. [ABSTRACT FROM AUTHOR]

US economic growth and air pollution were decoupled after 1970. Possible explanations include regulation, oil price shocks, technology and income growth. This paper uses VAR analysis to show that the 1970 Clean Air Act (CAA) may have actually increased pollution in the short run but led to accelerated improvements in abatement technology. Gross domestic product and consumption growth had little direct effect while oil price increases caused small but significant emissions reductions. Recursive simulation shows that overall, the CAA, by accelerating improvements in abatement technology, reduced total emissions as of 1998 to 46% of what they would have been. [ABSTRACT FROM AUTHOR]

In this paper cointegrating relations between six East and Southeast Asian markets relative to a base cluster of three global markets are investigated in the framework of zero-non-zero (ZNZ) patterned vector error-correction modelling (VECM). The analysis focuses upon market relations both before and after the Asian currency crisis. The strength of integration between markets is also evaluated by extending Geweke's measurement approach within this framework. The results show that, since the crisis, estimated integration strengths have become more powerful between the Asian and global markets, with the US market leading both the Asian markets and the markets of Japan and the UK. [ABSTRACT FROM AUTHOR]

The paper empirically analyzes financial integration and the benefits of international diversification across US, Japan and ASEAN equity markets. Our results suggest no evidence of cointegration among (1) ASEAN markets, (2) an individual ASEAN market, the US and Japanese markets, and (3) ASEAN markets, the US and Japanese markets. However, results from impulse-response functions indicate immediate responses of each ASEAN market to innovations in other ASEAN markets, as well as to innovations in the US and Japanese markets. Among the ASEAN markets, the Indonesian market seems relatively isolated; the Malaysian market is most influential, followed by the Singapore equity market. The US market is found to be more dominant than the Japanese market. Our results suggest potential benefits of international portfolio diversification across these markets for investors that have long-term investment horizons. However, the short term gains may be limited, especially to investors from the US. [ABSTRACT FROM AUTHOR]

This paper examines the linkages between US and Latin American stock markets during the 1995-2002 period using recently developed cointegration techniques that allow for structural shifts in the long-run relationship. Results suggest that when conventional cointegration tests are applied, a long-run relationship is found only in the cases of Brazil and Mexico for the Dow Jones (DJ) index, and in the case of Brazil for the Standard and Poor's 500 (SP500) index. In contrast, if the possibility of structural breaks is introduced, strong evidence is found in favour of such a relationship between the Argentine, Chilean and Venezuelan indices and the DJ index after the 1998 financial turmoil, and between the Brazilian and Mexican indices and the DJ index before such turbulence, while some marginal cointegration is detected between the Mexican and DJ indices from February 1998. Additionally, evidence is found of a cointegrating relationship between the Argentine, Chilean and Mexican indices and the SP500 index from August 1998, April 1999 and October 1999, respectively, and between the Brazilian and the SP500 indices before November 1997, as well as some marginal cointegration between the Mexican and SP500 indices before October 1999. The results suggest that the gains from international diversification for investors with long holding periods is limited. [ABSTRACT FROM AUTHOR]