In this paper we estimate the demand for exports and imports of manufactured goods for a panel containing the majority of the EU countries as well as the US and Japan. The model includes as explanatory factors both the traditional determinants of trade and also the stock of foreign direct investment (FDI). We apply panel unit root and cointegration tests allowing for heterogeneity. Whereas ther...

We derive a de nition of linear cointegration for nonlinear stochastic processes using a martingale representation theorem. The result shows that stationary linear cointegrations can exhibit nonlinear dynamics, in contrast with the normal assumption of linearity. We propose a sequential nonparametric method to test rst for cointegration and second for nonlinear dynamics in the cointegrated syst...

Using the Johansen cointegration technique, we find empirical evidence of long run comovements between five national stock market indexes and measures of aggregate real activity including the real oil price, real consumption, real money, and real output. Real returns on these indexes are typically related to transitory deviations from the long run relationship and to changes in the macroeconomi...

Johansen’s reduced rank maximum likelihood (ML) estimator for cointegration parameters in vector error correction models is known to produce occasional extreme outliers. Using a small monetary system and German data we illustrate the practical importance of this problem. We also consider an alternative generalized least squares (GLS) system estimator which has better properties in this respect....

We assess the sustainability of public finances in the EU15 using stationarity and cointegration analysis. Specifically, we use panel unit root tests of the first and second generation allowing in some cases for structural breaks. We also apply modern panel cointegration techniques developed by Pedroni (1999, 2004), generalized by Banerjee and Carrion-i-Silvestre (2006) and Westerlund and Edger...

This study is concerned with understanding of the factors of aggregate, nonviolent and violent crime categories in Turkey for the period 1965-2009. The determinants of all crime categories are related to selected socio-economic factors. Bounds testing approach to cointegration is employed to test the existence of long-run relationship amongst the variables. Cointegration analysis yields the maj...

This study examines the relationships between foreign aid, levels of schooling and democracy for Pakistan using the ARDL cointegration approach. The results of study provide strong evidence for fairly robust long run as well as short run relationships among these variables for the period 1973-2008. The results state that foreign aid and primary school enrollments have negative impact on democra...

In this paper we use cointegration analysis and the Law of One Price to test for proportionality between hake prices at different stages along the value chain in the French hake market. Cointegration analysis is an appropriate means of testing for price proportionality when price series are non-stationary, as was found to be the case for hake prices in France. Estimates of the relative size of ...

Intercept and deterministic trend functions are known to have a substantial effect on cointegration analysis, and notably on the asymptotic distributions of various test statistics. In this paper we propose a unifying approach to the analysis of cointegrated vector autoregressions by allowing for a wide class of trend functions. Next, estimates of these trends are incorporated in the asymptotic...