This article is concerned with the dynamic behaviour of UK unemployment. However, instead of using traditional approaches based on I(0) stationary or I(1) (integrated and/or cointegrated) models, we use the fractional integration framework. In doing so, we allow for a more careful study of the...

This paper proposes a consistent test for the goodness-of-fit of parametric regression models which overcomes two important problems of the existing tests, namely, the poor empirical power and size performance of the tests due to the curse of dimensionality and the choice of subjective...

Economic theories in dynamic contexts usually impose certain restrictions on the conditional mean of the underlying economic variables. Omnibus specification tests are the primary tools to test such restrictions when there is no information on the possible alternative. In this paper we study in...

We propose a new methodology for designing flexible proposal densities for the joint posterior density of parameters and states in a nonlinear, non-Gaussian state space model. We show that a highly efficient Bayesian procedure emerges when these proposal densities are used in an independent...

This paper contributes to the permanent income hypothesis (PIH) and excess consumption smoothness debate in the context of fractional integration. We show that the excess consumption smoothness result is a consequence of the quarterly data frequency commonly employed in empirical work. In fact,...

We formulate and solve a Rational Expectations New Keynesian macro model that implies non-linear cross-equation restrictions on the dynamics of inflation, the output gap and the Federal funds rate. Our maximum likelihood estimation procedure fully imposes these restrictions and yields asymptotic...

The sustainability of fiscal deficits has received in recent years increasing attention from economists. Empirical work has concentrated on both the univariate properties of debt and the cointegration properties of public revenues and expenditures. In this paper, we examine if sustainability of...

In this paper we test whether the dynamic behavior of stock market volatility in six emerging economies has changed over the period 1976:01-2004:12. This period corresponds to years of profound development of both the financial and the productive sides in these emerging countries, but also to...

Inflation volatility has significantly declined over the last 20 years in the U.S. To find out why, I follow a structural approach. I estimate a complete New Keynesian model which imposes cross-equation restrictions on the time series of inflation, the output gap and the interest rate. I perform...