EconPapers    
Economics at your fingertips  
 

Long Run Macroeconomic Relations in the Global Economy

Stephane Dees, Sean Holly, Mohammad Pesaran and L. Vanessa Smith

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: This paper focuses on testing long run macroeconomic relations for interest rates, equity, prices and exchange rates within a model of the global economy. It considers a number of plausible long run relationships suggested by arbitrage in financial and goods markets, and uses the global vector autoregressive (GVAR) model developed in Dees, di Mauro, Pesaran and Smith (2007) 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 pro.les. We .nd strong evidence in favour of the uncovered interest parity and to a lesser extent the Fisher equation across a number of countries, but our results for the PPP are much weaker. Also as to be expected, the transmission of shocks and subsequent adjustments in financial markets are much faster than those in goods markets.

Keywords: Global VAR; interdependencies; Fisher relationship; Uncovered Interest Rate Parity; Purchasing Power Parity; persistence profile; error variance decomposition (search for similar items in EconPapers)
JEL-codes: C32 E17 F47 R11 (search for similar items in EconPapers)
Pages: 29
Date: 2007-01
New Economics Papers: this item is included in nep-cba, nep-ifn and nep-mac
Note: Ec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (105)

Downloads: (external link)
https://files.econ.cam.ac.uk/repec/cam/pdf/cwpe0661.pdf (application/pdf)

Related works:
Journal Article: Long Run Macroeconomic Relations in the Global Economy (2007) Downloads
Working Paper: Long Run Macroeconomic Relations in the Global Economy (2007) Downloads
Working Paper: Long Run Macroeconomic Relations in the Global Economy (2007) Downloads
Working Paper: Long run macroeconomic relations in the global economy (2007) Downloads
Working Paper: Long Run Macroeconomic Relations in the Global Economy (2007) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:0703

Access Statistics for this paper

More papers in Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
Bibliographic data for series maintained by Jake Dyer ().

 
Page updated 2025-03-24
Handle: RePEc:cam:camdae:0703