This paper derives a method for estimating and testing the Linear Quadratic Adjustment Cost (LQAC) model when the target variable and some of the forcing variables follow I(2) processes. Based on a forward-looking error-correction formulation of the model it is shown how to obtain strongly...

The functioning of electricity markets has experienced increasing complexity as a result of deregulation in recent years. Consequently this affects the multilateral price behaviour across regions with physical exchange of power. It has been documented elsewhere that features such as long memory...

The role of additive outliers in integrated time series has attracted some attention recently and research shows that outlier detection should be an integral part of unit root testing procedures. Recently, Vogelsang [1999. Two simple procedures for testing for a unit root when there are additive...