This paper brings together several important strands of the econometrics literature: errorcorrection, cointegration and dynamic factor models. It introduces the Factor-augmented Error Correction Model (FECM), where the factors estimated from a large set of variables in levels are jointly...

This study evaluates the economic impact of the proposed COMESA-SADC-EAC Tripartite Free Trade Area (TFTA) on 26 African countries. It uses the global trade analysis project (GTAP) computable general equilibrium (CGE) model and database to measure the static effects of the establishment of the...

International aid has an ambiguous effect on the macro-economy of the recipient country. To the extent that aid raises consumer expenditure, there will be some real exchange rate appreciation and a shift of resources away from traded goods production and into non-traded goods production....

This study assesses the response of the trade balance to exchange rate fluctuations across a large number of countries. Fixed-effects regressions are estimated for 87 countries on annual data from 1994 to 2010. The trade balance improves significantly after a real depreciation, and to a similar...

A four-dimensional Structural Vector Auto-regression (SVAR) model is applied to investigate the implications of fuel imports and devaluation policy on Fiji's current account deficits and economic growth. The paper finds that short-term deterioration of the current account is partly due to higher...

Workers' remittance is a major source of foreign exchange earnings and plays an important role in the economy of Bangladesh. It accounts for 12% of GDP in 2010. This paper examines with annual data for 1971–2008, whether the flow of remittances is contributing positively to the development of...

This paper investigates the determinants of private investment in Senegal over the period of 1970-2000. It first tests the variables for unit root using two, relatively, new tests namely the Dickey-Fuller generalised least square de-trending test proposed by Elliot et al. (1996) and the...

The role of expectations for economic fluctuations has received considerable attention in recent business cycle analysis. We exploit Markov regime switching models to identify shocks in cointegrated structural vector autoregressions and investigate different identification schemes for bivariate...

In testing for the cointegrating rank of a vector autoregressive (VAR) process it is important to take into account level shifts that have occurred in the sample period. Therefore the properties of estimators of the time period where a shift has taken place are investigated. The possible...

It is argued that in structural vector autoregressive (SVAR) analysis a Markov regime switching (MS) property can be exploited to identify shocks if the reduced form error covariance matrix varies across regimes. The model setup is formulated and discussed and it is shown how it can be used to...