This argues for a closer link between the modelling of the long-run relations in applied economics and the intertemporal equilibrium notion from economic theory.

This paper considers forecast averaging when the same model is used but estimation is carried out over different estimation windows. It develops theoretical results for random walks when their drift and/or volatility are subject to one or more structural breaks. It is shown that compared to...

This paper considers the problem of forecasting under continuous and discrete structural breaks and proposes weighting observations to obtain optimal forecasts in the MSFE sense. We derive optimal weights for continuous and discrete break processes. Under continuous breaks, our approach recovers...

Interconnections can be an effective way to increase competition in wholesale electricity markets in particular for smaller markets with few actors. This paper quantitatively examines the potentials for interconnections in the Irish Single Electricity Market (SEM). We use a time-varying Kalman...

This paper This paper develops a new approach to the problem of testing the existence of a long-run level relationship between a dependent variable and a set of regressors, when it is not known with certainty whether the underlying regressors are trend- or first-difference stationary. The...

This paper investigates the presence of target-zone nonlinearities in the Pound Sterling/Deutsche Mark exchange rate for the period of the UK European Exchange Rate Mechanism (ERM) membership, using data with frequency of every two days. Tests against general nonlinear specifications as well as...

This paper addresses the problem of forecast evaluation in the context of a simple but realistic decision problem, and proposes a procedure, for the evaluation for forecats based on their average realized value to the decision maker.

The GARCH-t model is widely used to predict volatilty. However, modeling the conditional variance as a linear combination of past squared observations may not be the best approach if the standardized observations are non-Gaussian. A simple modi.cation lets the conditional variance, or its...

A test for time-varying correlation is developed within the framework of a dynamic conditional score (DCS) model for both Gaussian and Student t-distributions. The test may be interpreted as a Lagrange multiplier test and modified to allow for the estimation of models for time-varying volatility...

This paper estimates the effect of the merchant interconnector between Norway and the Netherlands on the level and residual volatility of hourly day-ahead electricity prices in the two connected markets. The price effects are estimated using single equation ARMA models and the volatility effects...