When monetary policy has an explicit inflation target, observed inflation should be a stationary process. In countries where, for a variety of reasons, the determinants of inflation could lead it to follow a non-stationary process, the adoption of an inflation targeting framework should...

This paper extends Gonzalo and Lee's (1998) results by studying the asymptotic and finite sample behavior of the Engle-Granger test for cointegration, under misspecification of the trend function in the form of neglected structural breaks. We allow breaks in level and slope of trend in both...

The literature on spurious regressions has 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 for the dependent and explanatory variables. This paper...

We study the phenomenon of spurious regression between two random variables,when the generating mechanism of individual series is assumed to follow a stationary process around a trend with (possibly) multiple breaks in the level and slope of trend. We develop the relevant asymptotic theory and...

This paper analyzes whether the real exchange-rate of the Mexican peso/US dollar revert to a long-run equilibrium value, and whether this value is unique. We use a method for testing stationarity, that allows for an unknown number of structural breaks in the level of the series. Using a long...

Utilizing re-sampling. Methods, we present evidence on the rejection probabilities for difference-stationary and trend-stationary models for Mexico’s real and real per-capita annual gross domestic product. The trend stationary alternative allows for stationary fluctuations around a long-run...

Mexican economic historiography recognizes the key role that public investment played in the country's economic performance from the post-revolutionary period until the beginning of the economic liberalization that began in the mid-1980s. However, there is no concrete empirical evidence that...

The authors construct a historical database of public investment (both total and broken down into its main components) for the period 1925 to 1981 in order to measure its impact on economic activity. Given the possible presence of crowding-out effects between public investment and private...

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 specifications are time series that may exhibit stochastic...