Purchasing power parity in the short and long run: a reappraisal of the post-1973 evidence

In this paper, an attempt is made to separate the short-run and long-run aspects of the purchasing power parity (PPP) relationship, using the techniques of band-spectral regression and cointegration for eight industrialized countries. The long-run PPP is first tested for all the eight countries, with reference to their nominal bilateral exchange rates vis-à-visthe US dollar. For five European currencies, the analysis is repeated with respect to the Deutschmark, with a separate consideration of the post-EMS period. In the concluding sections, possible reasons for PPP deviations are examined.     

Wages and prices in Europe: A test of the German leadership thesis

Zusammenfassung L?hne und Preise in Europa. Ein Test der These von der Vorherrschaft der Bundesrepublik. — Die Autoren prüfen die These, da das Europ?ische W?hrungssystem (EWS) der Bundesrepublik zur Führung bei der Inflationsbek?mpfung verhalf. Dabei werden zwei Ans?tze verwendet. Bei dem ersten wird die Bedeutung der deutschen Inflationserwartungen für die Erwartungen in anderen EWS-L?ndern untersucht, beim zweiten die Kointegration zwischen der Inflation in Deutschland und der in anderen EWS-L?ndern. Zur Kontrolle werden einerseits die Daten aus der Zeit vor Errichtung des EWS verwendet und andererseits die Daten des Vereinigten K?nigreichs, das am Wechselkursmechanismus des EWS nicht partizipierte. Die Ergebnisse sind zwar in mancher Hinsicht günstig, k?nnen aber nicht endgültig eine deutsche Führungsrolle im EWS best?tigen. Mit Hilfe der Kointegrationstechniken wird au\erdem gezeigt, da\ die Kaufkraftparit?t für das EWS nicht kennzeichnend war.

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Résumé Les revenus et les prix en Europe: Un test de la thèse de la prédominance allemande. — Cette étude a l’intention de vérifier la thèse que le système monétaire européen (SME) a fait se former la prédominance allemande dans la lutte contre l’inflation. Il y a deux tests. D’abord, on a examiné l’importance des expectations de l’inflation allemande pour les expectations aux autres pays du SME, puis on a examiné la cointégration de l’inflation en RFA avec celle aux autres pays. On emploie deux systèmes de contr?le: les données avant la fondation du SME et les données pour la Grande Bretagne qui n’a pas été membre du SME. Les résultats étant favorables à beaucoup d’autres aspects ne peuvent pas confirmer le r?le prédominant de la RFA dans le SME. En utilisant des techniques de cointégration on a aussi trouvé que la parité du pouvoir d’achat n’a pas caractérisé le SME.

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Resumen Salarios y precios en Europa : un test de la tesis del lidemgo alemán. — En este trabajo se examina la tesis que el Sistema Monetario Europeo (SME) constituye un vehículo para el liderazgo alemán en materia de política antiinflacionaria. Se emplean dos enfoques. En uno de ellos se estudia la relevancia de las expectativas inflacionarias en Alemania para las expectativas en otros países miembros del SME, en el otro se examina empirícamente la cointegraci?n entre la inflatión en Alemania y la de otros países del SME. Para ello se utilizan dos controles: datos para el período anterior al SME y datos para el Reino Unido, país no miembro del SME. Los resultados, si bien favorables en relatión a ciertos aspectos, no conf?rman en última instancia la tesis del liderazgo aleman en el SME. Asimismo, se demuestra que, utilizando técnicas de cointegración, el SME no está caracterizado por la paridad del poder de compra.

     

Trend and cyclical decoupling: new estimates based on spectral causality tests and wavelet correlations

The issue of decoupling of emerging market economies (EMEs) (especially in the Asian region) from the developments in advanced economies has become a subject of lively debate in recent years. Basically, decoupling seems to comprise three sub-hypotheses: (i) growth spillovers from advanced countries to EMEs decreasing progressively in importance, (ii) business cycles in EMEs becoming less synchronized with those of the advanced world and (iii) strengthening of growth spillovers and cyclical synchronization among the EMEs as a group. The received literature fails to distinguish adequately between the trend and cyclical aspects of the decoupling relationship. We resort to two frequency domain methods (nonstationary spectral causality testing and wavelet correlations), which seem to offer a neat separation of trend and cyclical decoupling. Based on a sample of seven EMEs from the Asian region (including the two large EMEs – China and India), we uncover strong evidence favouring both trend and cyclical decoupling.     

Votes,Parties and Seats : A Quantitative Analysis of Indian Parliamentary Elections, 1962–2014 by Vani Kant Borooah

Journal of Quantitative Economics -     

Time-Frequency Analysis for Nonstationary Time Series

Non-stationary time series are a frequently observed phenomenon in several applied fields, particularly physics, engineering and economics. The conventional way of analysing such series has been via stationarity inducing filters. This can interfere with the intrinsic features of the series and induce distortions in the spectrum. To avert this possibility, it might be a better alternative on occasions to proceed directly with the series via the so-called time-varying spectrum. This article outlines the circumstances under which such an approach is possible, drawing attention to the practical applicability of these methods. Several methods are discussed and their relative advantages and drawbacks delineated.

     

Dynamic stochastic general equilibrium (DSGE) modelling in practice: identification,estimation and evaluation

In recent years, dynamic stochastic general equilibrium (DSGE) models have come to play an increasing role in central banks, as an aid in the formulation of monetary policy (and increasingly after the global crisis, for maintaining financial stability). DSGE models, compared to other widely prevalent econometric models (such as vector autoregressive or large-scale econometric models), are less a-theoretic and with secure micro-foundations based on the optimizing behaviour of rational economic agents. Additionally, the models in spite of being strongly tied to theory, can be ‘taken to the data’ in a meaningful way. A major feature of these models is that their theoretical underpinnings lie in what has now come to be called as the New Consensus Macroeconomics (NCM). This paper concentrates on the econometric structure underpinning such models. Identification, estimation and evaluation issues are discussed at length with a special emphasis on the role of Bayesian maximum likelihood methods.     

Dynamic Harmonic Regression Methods in the Analysis of Stochastic Time Series Exhibiting Strong Trigonometric Components

Journal of Quantitative Economics - Strongly periodic series occur frequently in many disciplines. This paper reviews one specific approach to analyzing such series viz. the harmonic regression...     

Causal Inference and Scientific Explanation in Economics

Journal of Quantitative Economics -     

Dynamics of inflation in India - a P-Star approach

P-Star models have become increasingly popular in recent years in developed countries. However data constraints have limited their applicability to the LDCs. In this paper, such a model is attempted for India using both annual and quarterly data for the period 1955–1995. It is found that velocity in India is trend stationary and using cointegration techniques it is then possible to develop a model to gauge inflationary pressures in the economy. The model is well calibrated to data, and in out-of-sample forecasts, it significantly outperforms a seasonal ARMA benchmark model. The velocity gap version of the model is particularly successful.