The aim of this paper is to provide new empirical evidence on the impact of international financial integration on the long-run Real Exchange Rate (RER) in 39 developing countries belonging to three different geographical regions (Latin America, Asia and MENA). It covers the period 1979-2004,...

The Balassa-Samuelson (BS) effect is usually considered as the prime explanation of the continuous real exchange rate appreciation of the central and east European (CEE) transition countries against their western European counterparts. This paper tries to explain relative price differentials...

In this paper we replace the Gaussian errors in the standard Gaussian, linear state space model with stochastic volatility processes. This is called a GSSF-SV model. We show that conventional MCMC algorithms for this type of model are ineffective, but that this problem can be removed by...

We investigate changes in the time series characteristics of postwar U.S. inflation. In a model-based analysis the conditional mean of inflation is specified by a long memory autoregressive fractionally integrated moving average process and the conditional variance is modelled by a stochastic...

The linear Gaussian state space model for which the common variance istreated as a stochastic time-varying variable is considered for themodelling of economic time series. The focus of this paper is on thesimultaneous estimation of parameters related to the stochasticprocesses of the mean part...

Using quarterly data from 2000-2007 and applying Error Correction Model and Johansen Co-integration Approaches I estimate the impact of real oil price on the real exchange rate of Azerbaijani manat. Estimation outputs derived from these approaches are very close to each other and indicate that...

This paper reviews panel unit root and cointegration tests in the context of PPP. It highlights various drawbacks of existing methods. First, unit root tests suffer from severe size distortions in the presence of negative moving average errors. Second, the common demeaning procedure to correct...

In this paper we propose a simple extension to the panel case of the covariate-augmented Dickey Fuller (CADF) test for unit roots developed in Hansen (1995). The extension we propose is based on a p-values combination approach that takes into account cross-section dependence. We show that the...

This paper re-assesses the panel (unit root test) evidence for PPP on four monthly data sets. We discuss and illustrate that commonly-used first generation panel unit root tests are inappropriate for PPP analysis since they are constructed for cross-sectionally uncorrelated panels. Given that...

This paper examines the PPP hypothesis analysing the behaviour of the real exchange rates vis-à-vis the US dollar for four major currencies (namely, the Canadian dollar, the euro, the Japanese yen and the British pound). An innovative approach based on fractional integration in a multivariate...