We show how to relate the welfare of a country's infinitely-lived representative consumer to observable aggregate data. To a first order, welfare is summarized by total factor productivity and by the capital stock per capita. These variables suffice to calculate welfare changes within a country,...

By 1989 the Michigan Panel Study on Income Dynamics (PSID) had experienced approximately 50 percent sample loss from cumulative attrition from its initial 1968 membership. We study the effect of this attrition on the unconditional distributions of several socioeconomic variables and on the...

We re-examine Sephton and Larsen's (1991) conclusion that cointegration-based tests for market efficiency suffer from temporal instability. We improve upon their research by i) including a drift term in the vector error correction model (VECM) in the Johansen procedure, ii) correcting the...

This paper considers two potential rationales for the apparent absence of mean reversion in real exchange rates in the post-Bretton Woods era. We allow for (i) fractional integration and (ii) a double mean shift in the real exchange rate process. These methods, applied to CPI-based rates for 17...

Does merger and acquisition (M&A) activity occur in waves, that is, are there oscillations between low and high levels of M&A activity? The answer to this question is important in developing univariate as well as structural models of explaining and forecasting the stochastic behavior of M&A...

Under conditions of risk neutrality and rational expectations in the foreign exchange market, there should be a one-to-one relationship between the forward rate and the corresponding future spot rate. However, cointegration-based tests of the unbiasedness hypothesis of the forward rate have...

Several studies have tested for long-range dependence in macroeconomic and financial time series but very few have assessed the usefulness of long-memory models as forecast generating mechanisms. This study tests for fractional differencing in the U.S. monetary indices (simple sum and divisia)...

This paper shows that the recent literature that tests for a long-run Fisher relationship using cointegration analysis is seriously flawed. Cointegration analysis assumes that the variables in question are I(1) or I(d) with the same d. Using monthly post-war U.S. data from 1959-1997, we show...

This paper investigates the presence of fractal dynamics in stock returns. We improve upon existing literature in two ways: i) instead of rescaled-range analysis, we use the more efficient semi- nonparametric procedure suggested by Geweke and Porter-Hudak (GPH, 1983), and ii) to ensure...

We prove that the change in welfare of a representative consumer is summarized by the current and expected future values of the standard Solow productivity residual. The equivalence holds if the representative household maximizes utility while taking prices parametrically. This result justifies...