We characterize the restrictions imposed by the minimal I(2)-to-I(1) transformation that underlies much applied work, e.g. on money demand relationships or open-economy pricing relationships. The relationship between the parameters of the original I(2) vector autoregression, including the...

A representation for I(2) processes is derived which allows for trend-stationary components and restricts the deterministic part of the process to be at most linear. A two-step statistical analysis of the model is derived. The joint test of I(1) and I(2) cointegrating ranks is shown to be...

In this paper we apply the encompassing principle to test whether a model that has been estimated with seasonally adjusted data (SA) can encompass a model that is based on non-seasonllay adjusted (NSA) data. Building upon and extending the work på Ericsson, Hendry and Tran (1994) who analyze...

In this paper, we propose a framework for the modelling of multivariate dynamic processes which are driven by an unobservable common autoregressive component. Economically motivated by the mixture-of-distribution hypothesis, we model the multivariate intraday trading process of return...

This paper discusses a number of likelihood ratio tests on long-run relations and common trends in the I(2) model and provide new results on the test of overidentifying restrictions on β’xt and the asymptotic variance for the stochastic trends parameters, α⊥1: How to specify deterministic...

As an alternative to quasi-maximum likelihood, targeting estimation is a much applied estimation method for univariate and multivariate GARCH models. In terms of variance targeting estimation recent research has pointed out that at least finite fourth-order moments of the data generating process...

Asset prices tend to undergo wide swings around long-run equilibrium values which can have detrimental effects on the real economy. To get a better understanding of how the fi?nancial sector and the real economy interact this paper models the long swings in the Swiss franc-US dollar foreign...