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- Title
An I(2) cointegration analysis of small-country import price determination.
- Authors
Christian Kongsted, Hans
- Abstract
Summary. This paper develops a procedure for testing hypotheses on the full set of cointegration parameters of the I(2) model. It applies this procedure to the analysis of small-country import price determination, extending the standard empirical framework to allow for variables integrated of order two. The empirical analysis of Danish data for 1975–1995 yields a fully specified long-run structure of the I(2) model in terms of stationary pricing-to-market and inventory relations, a nominal second-order stochastic trend embodied in equal proportions in domestic and foreign price levels, and a real first-order trend driving the relative prices and the real interest rate.
- Subjects
HYPOTHESIS; PRICING; COINTEGRATION; ECONOMETRICS
- Publication
Econometrics Journal, 2003, Vol 6, Issue 1, p53
- ISSN
1368-4221
- Publication type
Article
- DOI
10.1111/1368-423X.00099