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....

The Glick and Rogoff (1995) hypothesis suggests that common or global shocks do not influence current accounts of countries which are symmetric. This is tested for 37 pairs of current account imbalances out of 17 OECD countries. Using time series data that spans the pre-Global crisis period but...

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...

Recent economic developments have shown the importance of spillover and contagion effects in financial markets. Such effects are not limited to relations between the levels of financial variables but also impact on their volatility. I investigate Granger causality in conditional mean and...

A test for the cointegrating rank of a vector autoregressive (VAR) process with a possible shift and broken linear trend is proposed. The break point is assumed to be known. The setup is a VAR process for cointegrated variables. The tests are not likelihood ratio tests but the deterministic...

We investigate autoregressive approximations of multiple frequency I(1) processes, of which I(1) processes are a special class. The underlying data generating process is assumed to allow for an infinite order autoregressive representation where the coefficients of the Wold representation of the...

A system of U.S. and euro area short- and long-term interest rates is analyzed. According to the expectations hypothesis of the term structure the interest rate spreads should be stationary and according to the uncovered interest rate parity the difference between the U.S. and euro area longterm...