Econometrics Seminar: Søren Johansen & Katarina Juselius, University of Copenhagen

Two presentations within Time Series Econometrics

2017.08.21 | Bodil Krog

Date Tue 19 Sep
Time 14:15 16:00
Location Fuglesangs Allé 4, 8210 Aarhus V, building 2632(L), room 242

14:15-15:00: Søren Johansen, University of Copenhagen

Title: Improved inference on cointegrating vectors in the presence of a near unit root using adjusted quantiles (Joint work with Massimo Franchi)

Abstract: It is well known that inference on the cointegrating relations in a vector autoregression (CVAR) is difficult in the presence of a near unit root. The test for a given cointegration vector can have rejection probabilities under the null, which vary from the nominal size to more than 90%. This paper formulates a CVAR model allowing for multiple near unit roots and analyses the asymptotic properties of the Gaussian maximum likelihood estimator. Then two critical value adjustments suggested by McCloskey (2017) for the test on the cointegrating relations are implemented for the model with a single near unit root, and it is found by simulation that they eliminate the serious size distortions, with a reasonable power for moderate values of the near unit root parameter. The findings are illustrated with an analysis of a number of different bivariate DGPs.

15:15-16:00: Katarina Juselius, University of Copenhagen

Title: Are outcomes driving expectations or the other way around? An I(2) CVAR analysis of interest rate expectations in the dollar/pound market (Joint work with Josh R. Stillwagon)

Abstract: This paper uses consensus forecasts to address empirical puzzles in international macro using the Cointegrated VAR model. The data, consisting of three-month libor rates, their three-month ahead forecasts, prices and exchange rates for the US and UK, were all found to be near I(2) consistent with imperfect knowledge expectations. The I(2) analysis showed that over the medium run the nominal exchange rate has moved away from equilibrium values with interest rates following suit, whereas over the long run the nominal exchange rate was adjusting while the interest rate forecasts pushed the system away from steady state. Evidence of self-reinforcing feedback mechanisms in the system signals the importance of speculative bubbles for the determination of the exchange rate and the interest rates.

Organizers: Niels Haldrup and Paolo Santucci de Magistris

Econometrics Seminar Series