This paper proposes an estimate of the Hungarian real exchange rate=20 misalignments using fractionally integrated threshold models (FI-STARMA and=20= FI-TARMA=20 processes). This allows us to simultaneously take into account two types of=20 persistence: a long memory behavior due to the...

This paper provides some test cases, called circuits, for the evaluation of Gaussian likelihood maximization algorithms of the cointegrated vector autoregressive model. Both I(1) and I(2) models are considered. The performance of algorithms is compared first in terms of effectiveness, defined as...

A novel class of dimension reduction methods is combined with a stochastic multi-factor panel regression-based state-space model in order to model the dynamics of yield curves whilst incorporating regression factors. This is achieved via Probabilistic Principal Component Analysis (PPCA) in which...

We develop novel multivariate state-space models wherein the latent states evolve on the Stiefel manifold and follow a conditional matrix Langevin distribution. The latent states correspond to time-varying reduced rank parameter matrices, like the loadings in dynamic factor models and the...

The relation between causal structure and cointegration and long-run weak exogeneity is explored using some ideas drawn from the literature on graphical causal modeling. It is assumed that the fundamental source of trending behavior is transmitted from exogenous (and typically latent) trending...

This survey paper discusses the Cointegrated Vector AutoRegressive (CVAR) methodology and how it has evolved over the past 30 years. It describes major steps in the econometric development, discusses problems to be solved when confronting theory with the data, and, as a solution, proposes a...

Estimation of the I(2) cointegrated vector autoregressive (CVAR) model is considered. Without further restrictions, estimation of the I(1) model is by reduced-rank regression (Anderson (1951)). Maximum likelihood estimation of I(2) models, on the other hand, always requires iteration. This paper...

This paper analyses the NAIRU making use of a cointegrated VAR and of Italian labour market data. We show that a cointegrated VAR represents a statistically adequate (using Aris Spanos's terminology) approach to the estimation of the NAIRU. This is an effective way to overcome several problems...

In time series macroeconometric models, the first difference in the logarithm of a variable is routinely used to represent the rate of change of that variable. It is often overlooked that the assumed approximation is accurate only if the rates of change are small. Models of hyper-inflation are a...

The standard Vector Error Correction Model (VECM) approach to investigating the underlying dynamics of economic variables assumes a constant co-integration space. This paper relaxes this assumption by implementing a regime switching VECM that allows for shifts in both the drift and the long-run...