The study considers the ADF and KPSS tests for unit root testing in a time series characterized by a number of structural changes in its mean. Using the Monte Carlo simulation method the percentage points of the tests distributions are estimated. These two tests are biased towards non-rejection...

This note addresses some theoretical and econometric aspects of modelling addictive consumption. We show that the solution to the optimization problem leads to a specification of the reduced form equation which is different from what has been estimated in the literature. We also demonstrate that...

The cyclical behaviour of the trade balance is examined using quarterly data for eight countries covering the period 1960:1-1995:3. Two methods are employed: the calculation of the correlation coefficient between the HP-filtered series and the estimation of a structural time series model. Both...

This paper presents a test of the P-Star model using US quarterly data over the period 1951:1-1991:4. The basic formulation of the P-Star model, which is derived from the quantity theory of money, is manipulated to obtain an equation for the price level in terms of a stochastic trend and the...

Empirical evidence on capital market integration in Europe is presented by testing for mean reversion in the real interest differentials of seven European countries vis-a-vis Germany. The tests overwhelmingly reject the null hypothesis of random walk in the real interest rate differentials,...

This paper examines the cyclical behaviour of output, money, stock prices and interest rates using annual US data covering the period 1900-91. The cyclical components are extracted from a seemingly unrelated time series equations model. The cyclical relationships are subsequently assessed by...

This paper investigates the possibility of constructing a composite leading indicator of Australian inflation. Five variables are considered and found to have both short-run and long-run causal linkages with consumer prices. A composite leading indicator is constructed on the basis of the...

This paper examines the behaviour of the Chinese official CPI relative to a market-based index. The empirical results indicate that the official index underestimates the actual inflation rate and that the bias is time-varying. The biasedness of the official index is attributed to covert price...

This paper presents some evidence on the uncovered interest parity (UIP) hypothesis using an alternative model specification and quarterly data on three-month treasury bill rates denominated in eleven currencies vis-a-vis the dollar. Results of cointegration and coefficient restriction tests are...

Conventional PPP neglects the role of uncertainty and expectations in the determination of exchange rates. In the presence of uncertainty and expectations about the future, as postulated by ex ante PPP, the exchange rate is determined not only by current relative prices but also by the expected...