We develop a generalised impulse response function (GIRF) approach to explore the different impacts of aggregate and sectoral shocks within a VAR-GARCH-M model.Using the output of our GIRF analysis, we explore the behaviour of three European countries (Germany, Spain and the UK). We analyse the...

This paper reviews recent developments in the analysis of non-stationary panels, focusing on empirical applications of panel unit root and cointegration tests in the context of PPP. It highlights various drawbacks of existing methods. First, unit root tests suffer from severe size distortions in...

This paper provides empirical evidence on the response of monetary policymakers to uncertainty. Using data for the UK since the introduction of inflation targets in October 1992, we find that the impact of inflation on interest rates is lower when inflation is more uncertain and is larger when...

A macro model is developed incorporating the productive effects of public expenditure, but also allowing for congestion. The Pigouvian tax rate to correct for the distortion caused by congestion is found and the optimal level of public expenditure is characterized.

The finite-sample null distribution of the Jarque-Bera Lagrange multiplier test for normality differs considerably from the asymptotic X2 (2). However, asymptotic critical values are commonly used in applied work, even for relatively small sample sizes. Here, we develop very accurate response...

In this paper we test for the inclusion of the bid-ask spread in the consumption CAPM, in the UK stock market over the time period of 1980-2000. Two econometric models are used; first, Fisher’s (1994) asset pricing model is estimated by GMM, and secondly, the VAR approach proposed by Campbell...