In this paper we show the consequences of applying a panel unit root test when testing for a purchasing power parity relationship. The distribution of the tests investigated, including the IPS test of Im et al (1997), are influenced by a common stochastic trend which is usually not accounted...

We propose a seasonal cointegration model [SECM] for quarterly data which includes variables with different numbers of unit roots and thus needs to be transformed in different ways in order to yield stationarity. A Monte Carlo simulation is carried out to investigate the consequences of...

This paper analyzes how bond option prices are affected by different types of monetary policy. Analytical results from a general equilibrium model with sticky wages show that employment or output targeting typically give lower bond option prices than inflation targeting. -- inflation targeting ;...

We summarize some methods useful in formulating and solving Hansen-Sargent robust control problems, and suggest extensions to discretion and simple rules. Matlab, Octave, and Gauss software is provided. We illustrate these extensions with applications to the term structure of interest rates, the...

We show how it is possible to generate multivariate data which have moments arbitrary close to the desired ones. They are generated as linear combinations of variables with known theoretical moments. It is shown how to derive the weights of the linear combinations in both the univariate and the...