Testing Hypotheses in an I(2) Model with Applications to the Persistent Long Swings in the Dmk/$ Rate

Publikation: Working paperForskning

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  • 0734

    Forlagets udgivne version, 298 KB, PDF-dokument

  • Søren Johansen
  • Katarina Juselius, Danmark
  • Roman Frydman, New York University, USA
  • Michael Goldberg, University of New Hampshire, USA
results on the test of overidentifying restrictions on ß'xt and the asymptotic variance for the stochastic trends parameters, a¿1: How to specify deterministic components in the I(2) model is discussed at some length. Model specification and tests are illustrated with an empirical analysis of long and persistent swings in the foreign exchange market between Germany and USA. The data analyzed consist of nominal exchange rates, relative prices, US inflation rate, two long-term interest rates and two short-term interest rates over the 1975-1999 period. One important aim of the paper is to demonstrate that by structuring the data with the help of the I(2) model one can achieve a better understanding of the empirical regularities underlying the persistent swings in nominal exchange rates, typical in periods of floating exchange rates
OriginalsprogEngelsk
Antal sider33
StatusUdgivet - 2007
Eksternt udgivetJa

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JEL Classification: C32, C52, F41

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