This paper examines the ASEAN-5 countries and explores the impact of structural breaks on the level of financial integration in that region. An extended cointegration procedure allowing for three types of structural break, is employed and compared with the standard Johansen procedure, for daily...

This paper introduces nowcasting causality as the mixed-frequency version of instantaneous causality. We analyze the relationship between nowcasting and Granger causality in a mixed-frequency VAR and illustrate its impact on the significance of high-frequency variables in mixed-frequency...

We propose a residual-based augmented Dickey–Fuller (ADF) test statistic that allows for detection of stationary cointegration within a system that may contain both I(2) and I(1) observables. The test is also consistent under the alternative of multicointegration, where first differences of...

We consider the use of information criteria (IC) on the basis of a semiparametric seasonal error correction model for selecting seasonal cointegrating ranks. Some limit properties of the IC are considered and, through a small Monte Carlo simulation, we evaluate the performance of the IC.

When a k period future return is regressed on a current variable such as the log dividend yield, the marginal significance level of the t-test that the return is unpredictable typically increases over some range of future return horizons, k. Local asymptotic power analysis shows that the power...

This paper analyzes the performance of heteroskedasticity-and-autocorrelation-consistent (HAC) covariance matrix estimators in which the residuals are prewhitened using a vector autoregressive (VAR) filter. We highlight the pitfalls of using an arbitrarily fixed lag order for the VAR filter, and...

This paper revisits the empirical evidence of purchasing power parity under the current float by recursive mean adjustment (RMA) proposed by So and Shin (1999). We first report superior power of the RMA-based unit root test in finite samples relative to the conventional augmented Dickey–Fuller...

The use of recursive demeaning and detrending procedures in unit root tests has been popular in the literature, since they lead to more precise estimation of the persistence parameter and greater power in unit root tests. However, we find that unit root tests using these recursive procedures...

This paper introduces a new confidence interval (CI) for the autoregressive parameter (AR) in an AR(1) model that allows for conditional heteroskedasticity of a general form and AR parameters that are less than or equal to unity. The CI is a modification of Mikusheva's (2007a) modification of...

We show that the CUSUM and LM tests for structural change in the volatility process enjoy monotonic power. The framework is general including many recently proposed non-stationary GARCH-type models. The result is in contrast to the well-known issue of non-monotonic power for the CUSUM-based...