I apply the Johansen and Swensen (1999, 2004) method of testing exact rational expectations within the cointegrated VAR (Vector Auto-Regressive) model, to testing the New Keynesian (NK) model. This method permits the testing of rational expectation systems, while allowing for non-stationary data. The NK-model is tested on quarterly U.S. and Euro area time series data. I find that the restrictio...

This paper examines the determinants of international capital inflows into Malaysia in the forms of pull and push factors. The results from Johansen and Juselius cointegration test confirmed the existence of a long run stable equilibrium among the variables in the model. In addition, the Error Correction Model (ECM) has been utilized to detect the long run divergence from the equilibrium relati...

The primary aim of the paper is to place current methodological discussions on empirical modeling contrasting the ‘theory first’ versus the ‘data first’ perspectives in the context of a broader methodological framework with a view to constructively appraise them. In particular, the paper focuses on Colander’s argument in his paper “Economists, Incentives, Judgement and Empirical Work” relating ...

This paper examines the e↵ects of liquidity on the demand for imports of non-durable consumers’ goods in Trinidad and Tobago. A parsimonious vector equilibrium correction model (VEqCM) is used to test the hypotheses that liquidity has both longand short-run e↵ects. The multivariate cointegration approach of Johansen and Juselius (1990) is used to determine long-run relations and general to spec...

This paper examines the causal relationship between energy use and real GDP for the period 1967-2002 in Iran. The results of Phillips- Perron test indicate that the real GDP and the four categories of energy, i.e. coal, oil, gas, and hydroelectric energy are integrated of order one. Besides, the Johansen — Juselius maximum likelihood co- integration tests imply the existence of Granger causalit...

This study is aimed at examining the long run and short run relationships between both Islamic and conventional financial development with the economic growth in the Bahrain dual financial system. Using quarterly data (2000:1-2010:4) retrieved from Monthly Statistical Bulletin of Central bank of Bahrain (CBB) and International Financial Statistics (IFS) of International Monetary Funds (IMF), th...

The objective of the paper is to ascertain the influence of shares derivatives trading on the Malaysian stock market. Johansen-Juselius’ co-integration test reveals signs of increasing integration between these cash and futures markets over time. The Granger causality test indicates that the stock index futures Granger causes the cash index with no feedback in the reverse direction during perio...

This paper studies the Balassa-Samuelson hypothesis in two areas with strong differences in economic development, sixteen OECD countries and sixteen Latin American economies. Applying panel cointegration and bootstrapping techniques that solve for cross-sectional dependence problems in the data, we find that the second stage of the hypothesis, which relates relative sector prices with the real ...

This paper is an attempt to test the existence of Wagner’s Law in Pakistan. In this connection the Johansen and Juselius (1990) Cointegration approach has been used to test the long-run relationship between government expenditures and its determinants for Pakistan. Short-run dynamics are estimated by using the Error Correction Mechanism (ECM), various diagnostics and the stability tests are use...

nowadays, issues of environment degradation sourcing in human actions and economic activities are of crucial worldwide subjects that all societies are concerned with them. its importance is not only of the natural resources systems’ aspects, but it is also crucial from the socio-economic point of view. so, environmental subjects have considerable role in sustainable development process. iran as...