This paper develops a system instrumental variable method to estimate the speed of adjustment coefficient in the long-run equilibrium of structural error correction models for a class of linear rational expectations models. This method is applied to an exchange rate model with sticky prices, in...

Error correction models are widely used to estimate dynamic cointegrated systems. In most applications error correction models are reduced form models. As a result, non-structural speed of adjustment coefficients are estimated in these applications. A single equation instrumental variable method...

When univariate methods are applied to real exchange rates, point estimates of autoregressive coefficients typically imply very slow rates of mean reversion. Rogoff (1996) discusses that the remarkable consensus of 3-5 year half-lives of purchasing power parity (PPP) deviations is found among...

To investigate if the mutual fund flows have been a driving factor in the US stock market at the macro level, we combine information from the stock market with information from bond and money markets in a system method. The empirical evidence from Seemingly Unrelated Regression Error Correction...

This paper examines whether inflation targeting (IT) influences purchasing power parity (PPP) by a bias correction approach under cross-sectional dependence. The recursive mean adjustment (RMA) method proposed by So and Shin (1999) and Shin and So (2001) is employed to correct a downward bias...

Forecasting sales and demand over 6–24 month horizon is crucial for planning the production processes of automotive and other complex product industries (e.g., electronics and heavy equipment) where typical concept-to-release times are 12–60 month long. However, nonlinear and nonstationary...

This article examines whether Inflation Targeting (IT) matters for long-run Purchasing Power Parity (PPP). For this purpose, we formally assess the evidence on PPP for a panel of 19 countries using two price indices and two panel unit root tests with cross-sectional dependence. The empirical...

To study dynamic and causal relations between stock returns and investment trust flows in Japan, we employ a system method which utilizes information from the stock, bond, and money markets. The empirical evidence from SURECM, and Granger (1969) and Sims (1972) causality tests in the system...