We test the purchasing power parity hypothesis for the Mexican peso/US dollar real exchange rate using monthly data for 1969–2010. Results suggest that the real exchange rate reverts to a changing mean. These mean shifts can be explained by liberalization policies implemented during the 1980s...

Polynomial specifications are widely used, not only in applied economics, but also in epidemiology, physics, political analysis, and psychology, just to mention a few examples. In many cases, the data employed to estimate such estimations are time series that may exhibit stochastic nonstationary...

Declining inflation persistence has been documented in numerous studies. When such series are analyzed in a regression framework in conjunction with other persistent time series, spurious regressions are likely to occur. We propose to use the coefficient of determination R2 as a test statistic...

This paper analyses the asymptotic and finite sample implications of different types of nonstationary behavior among the dependent and explanatory variables in a linear spurious regression model. We study cases when the nonstationarity in the dependent and explanatory variables is deterministic...

It has been found that the t-statistic for testing the null of no relationship between two independent variables diverges asymptotically under a wide variety of nonstationary data generating processes. This paper introduces a simple method which guarantees convergence of this t-statistic to a...

The concept of Granger-Causality (GC) is widely used to draw inference concerning causality in applied economics. Stationary series are the term of reference used in GC testing, which is generally studied by means of a standard Dickey-Fuller test. We prove that, when the Data Generating Process...

We study whether there is a long-run relationship between Mexican current account (CA) revenues and expenditures. Our results show that evidence in favor of this claim is drawn only when (at least) three structural break levels are allowed. The CA therefore behaves as a broken-mean stationary...

We study the hypothesis of convergence amongst Mexican regions since 1940 with special interest in the post-trade liberalization period. A time-series analysis shows that difference in income levels between the capital and the rest of the regions tend to narrow over time. Using the concept of...

The concept of Granger-Causality (GC) is widely used to draw inference concerning causality in applied economics. Stationary series are the term of reference used in GC testing, which is generally studied by means of a standard Dickey-Fuller test. We prove that, when the Data Generating Process...

This paper extends recent research on the behaviour of the t-statistic in a long-horizon regression (LHR). We assume that the explanatory and dependent variables are generated according to the following models: a linear trend stationary process, a broken trend stationary process, a unit root...