An I(2) Cointegration Analysis Of Small-Country Import Price Determination  

Oleh:

Kongsted, Hans Christian

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Econometrics Journal vol. 6 no. 1 (Jun. 2003), page 53-71.
Topik: Pricing-to-market; Long-run price trends; Second-order integration; Stochastic trend; Nominal trend.
Fulltext: 53.pdf (124.75KB)

Isi artikel

This paper develops a procedure for testing hypotheses on the full set of cointegration parameters of the I(2) model. It applies this procedure to the analysis of smallcountry import price determination, extending the standard empirical framework to allow for variables integrated of order two. The empirical analysis of Danish data for 1975–1995 yields a fully specified long-run structure of the I(2) model in terms of stationary pricingto- market and inventory relations, a nominal second-order stochastic trend embodied in equal proportions in domestic and foreign price levels, and a real first-order trend driving the relative prices and the real interest rate.

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