Convergence and Cointegration

  1. Garcia-Hiernaux, Alfredo
  2. Guerrero, David E.
Revue:
Documentos de Trabajo (ICAE)

ISSN: 2341-2356

Année de publication: 2011

Número: 22

Pages: 1-27

Type: Working Paper

DIALNET GOOGLE SCHOLAR lock_openDocta Complutense editor

D'autres publications dans: Documentos de Trabajo (ICAE)

Résumé

This paper provides a new, united, and flexible framework to measure and characterize convergence in prices. We formally define this notion and propose a model to represent a wide range of transition paths that converge to a common steady-state. Our framework enables the econometric measurement of such transi-tional behaviors and the development of testing procedures. Speci¯cally, we derive a statistical test to determine whether convergence exists and, if so, which type: as catching-up or steady-state. The application of this methodology to historic wheat prices results in a novel explanation of the convergence processes experienced during the 19th century.

Références bibliographiques

  • Akaike, H. (1974). A new look at the statistical model identification. IEEE Transactions on Automatic Control, AC-19(6):716–723.
  • Bentzen, J. (2005). Testing for catching-up periods in time-series convergence. Economic Letters, 88:323–328.
  • Bernard, A. B. and Durlauf, S. N. (1995). Convergence in international output. Journal of Applied Econometrics, 10:97–108.
  • Bernard, A. B. and Durlauf, S. N. (1996). Interpreting tests of the convergence hypothesis. Journal of Econometrics, 71:161–173.
  • Busetti, F., Fabiani, S., and Harvey, A. (2006). Convergence of prices and rates of inflation. Oxford Bulletin of Economics and Statistics, 68:863–877.
  • Cecchetti, S. G., Mark, N. C., and Sonora, R. J. (2002). Price index convergence among United States cities. International Economic Review, 43(4):1081–1099.
  • Chong, T. T. L., Hinich, M. J., Liew, V. K. S., and Lim, K. P. (2008). Time-series test of nonlinear convergence and transitional dynamics. Economic Letters, 100:337–339.
  • Datta, A. (2003). Time-series tests of convergence and transitional dynamics. Economic Letters, 81:233–240.
  • Davis, R. A., Chen, M., and Dunsmuir, W. T. M. (1995). Inference for MA (1) processes with a root on or near the unit circle. Probability and Mathematical Statistics, 15:227242.
  • Engle, R. F. and Granger, C. W. J. (1987). Co-integration and error correction: Representation, estimation and testing. Econometrica, (55):251–276.
  • Fan, C. S. and Wei, X. (2006). The law of one price: Evidence from the transitional economy of china. The Review of Economics and Statistics, 88(4):682–697.
  • Goldberg, P. K. and Verboven, F. (2005). Market integration and convergence to the law of one price: Evidence from the european car market. Journal of International Economics, 65(1):49–73.
  • Hannan, E. J. and Quinn, B. G. (1979). The determination of the order of an autoregression. Journal of the Royal Statistical Association, Series B, 41:713–723.
  • Hobijn, B. and Franses, P. H. (2000). Asymptotically perfect and relative convergence of productivity. Journal of Applied Econometrics, 15:59–81.
  • King, A. and Ramlogan-Dobson, C. (2011). Nonlinear time-series convergence: The role of structural breaks. Economic Letters, 110:238–240.
  • Lan, Y. and Sylwester, K. (2010). Does the law of one price hold in China? testing price convergence using disaggregated data. China Economic Review, 21(2):224–236.
  • Ljung, G. M. and Box, G. E. P. (1978). On a measure of lack of fit in time series models. Biometrika, 65:297–303.
  • Lo, A. (2004). Market efficiency from an evolutionary perspective. Journal of Portfolio Management, (30):15–29.
  • Lo, A. (2005). Reconciling efficient markets with behavioral finance: The Adaptive Markets Hypothesis. Journal of Investment Consulting, (7):21–24.
  • MacKinnon, J. G. (1991). Critical values for cointegration tests. In Engle, R. F. and Granger, C. W. J., editors, Long-run economic relationships: Readings in cointegration. Oxford University Press: Oxford.
  • Mauricio, J. A. (2005). Exact maximum likelihood estimation of partially nonstationary vector arma models. Computational Statistics and Data Analysis, 50(12):3644–3662.
  • Nahar, S. and Inder, B. (2002). Testing convergence in economic growth for OECD countries. Applied Economics, 34(1):2011–2022.
  • O’Rourke, K. H. and Williamson, J. G. (1999). Globalization and History. MIT Press, Cambridge, Mass.
  • Phillips, P. C. B. (1991). Optimal inference in cointegrated systems. Econometrica, 59:283–306.
  • Phillips, P. C. B. and Sul, D. (2007). Transition modeling and econometric convergence tests. Econometrica, 75:1771–1855.
  • Phillips, P. C. B. and Sul, D. (2009). Economic transition and growth. Journal of Applied Econometrics, 24:1153–1185.
  • Razzaque, M., Osafa-Kwaako, P., and Grynberg, R. (2007). Long-run trend in the relative price: Empirical estimation for individual commodities. In Grynberg, R. and Newton, S., editors, Commodity prices and development, pages 35–67. Oxford University Press, Oxford.
  • Robinson, T. (2007). Have european gas prices converged? Energy Policy, 35:2347–2351.
  • Saikkonen, P. and L¨utkepohl, H. (2002). Testing for a unit root in a time series with a level shift at unknown time. Econometric Theory, 18:313–348.
  • Shin, D. and Fuller, W. (1998). Unit-root tests based on unconditional maximum likelihood estimation for the autoregressive moving average. Journal of Time Series Analysis, 19:591–599.
La source de données: Dialnet