An I(2) Cointegration Analysis of Price and Quantity Formation in Danish Manufactured Exports.
The long-run and short-run structure of the Danish manufacturing export sector is analyzed within a cointegrated vector autoregressive model. The price variables of the analysis can be characterized as integrated of second order, I(2), but long-run homogeneity seems to cancel the I(2)-trend allowing the analysis of a transformed data set to take place within the cointegrated I(1)-framework. Two long-run relations are found and identified as a demand-relation for Danish exports and a polynomially cointegrated price relation. In the price formation a large weight to foreign prices and an effect from the rate of inflation to the steady-state markup are found. The latter effect is interpreted as an element of caution in the price setting in an inflationary environment. To characterize the short-run behavior of the Danish export-sector a structural representation of the model is developed. Copyright 2002 by Blackwell Publishing Ltd
Year of publication: |
2002
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Authors: | Nielsen, Heino Bohn |
Published in: |
Oxford Bulletin of Economics and Statistics. - Department of Economics, ISSN 0305-9049. - Vol. 64.2002, 5, p. 449-72
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Publisher: |
Department of Economics |
Saved in:
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