EconStor >
Institut für Weltwirtschaft (IfW), Kiel >
Economics: The Open-Access, Open-Assessment E-Journal - Journal Articles >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/18001
  
Title:Long Run Macroeconomic Relations in the Global Economy PDF Logo
Authors:Pesaran, Mohammad Hashem
Holly, Sean
Dees, Stephane
Smith, L. Vanessa
Issue Date:2007
Citation:[Journal:] Economics: The Open-Access, Open-Assessment E-Journal [Volume:] 1 [Issue:] 2007-3 [Pages:] 1-20 [DOI/URN:] doi:10.5018/economics-ejournal.ja.2007-3
Series/Report no.:economics - The Open-Access, Open-Assessment E-Journal 2007-3
Abstract:This paper presents tests of long run macroeconomic relations involving interest rates, equity, prices and exchange rates suggested by arbitrage in financial and goods markets. It uses the global vector autoregressive (GVAR) model to test for long run restrictions in each country/region conditioning on the rest of the world. Bootstrapping is used to compute both the empirical distribution of the impulse responses and the log-likelihood ratio statistic for over-identifying restrictions. The paper also examines the speed with which adjustments to the long run relations take place via the persistence profiles. It finds strong evidence in favour of a long run version of uncovered interest parity and to a lesser extent the Fisher equation across a number of countries, but the test results for the purchasing power parity relation are much weaker. Also the transmission of shocks and subsequent adjustments in financial markets are much faster than those in goods markets.
Subjects:Global VAR
Fisher relationship
Uncovered Interest Rate Parity
Purchasing Power Parity
persistence profile
JEL:E17
F47
R11
C32
Persistent Identifier of the first edition:doi:10.5018/economics-ejournal.ja.2007-3
URL of the first edition:http://www.economics-ejournal.org/economics/journalarticles/2007-3
Creative Commons License:http://creativecommons.org/licenses/by-nc/2.0/de/deed.en
Document Type:Article
Appears in Collections:Economics: The Open-Access, Open-Assessment E-Journal - Journal Articles

Files in This Item:
File Description SizeFormat
economics_2007-3.pdf987.26 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/18001

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.