EconPapers    
Economics at your fingertips  
 

Efficient Estimation of the Seemingly Unrelated Regression Cointegration Model and Testing for Purchasing Power Parity

Hyungsik Moon () and Benoit Perron ()

Econometric Reviews, 2005, vol. 23, issue 4, 293-323

Abstract: This paper studies the efficient estimation of seemingly unrelated linear models with integrated regressors and stationary errors. We consider two cases. The first one has no common regressor among the equations. In this case, we show that by adding leads and lags of the first differences of the regressors and estimating this augmented dynamic regression model by generalized least squares using the long-run covariance matrix, we obtain an efficient estimator of the cointegrating vector that has a limiting mixed normal distribution. In the second case we consider, there is a common regressor to all equations, and we discuss efficient minimum distance estimation in this context. Simulation results suggests that our new estimator compares favorably with others already proposed in the literature. We apply these new estimators to the testing of the proportionality and symmetry conditions implied by purchasing power parity (PPP) among the G-7 countries. The tests based on the efficient estimates easily reject the joint hypotheses of proportionality and symmetry for all countries with either the United States or Germany as numeraire. Based on individual tests, our results suggest that Canada and Germany are the most likely countries for which the proportionality condition holds, and that Italy and Japan for the symmetry condition relative to the United States.

Keywords: Seemingly unrelated regressions; Efficient estimation; Purchasing power parity; Minimum distance (search for similar items in EconPapers)
Date: 2005
References: Add references at CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1081/ETC-200040777 (text/html)
Access to full text is restricted to subscribers.

Related works:
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:taf:emetrv:v:23:y:2005:i:4:p:293-323

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/LECR20

Access Statistics for this article

Econometric Reviews is currently edited by Dr. Essie Maasoumi

More articles in Econometric Reviews from Taylor & Francis Journals
Bibliographic data for series maintained by ().

 
Page updated 2019-08-20
Handle: RePEc:taf:emetrv:v:23:y:2005:i:4:p:293-323