Fractional Integration and Cointegration: An Overview and an Empirical Application

Luis Gil-Alana and Javier Hualde

Chapter 10 in Palgrave Handbook of Econometrics, 2009, pp 434-469 from Palgrave Macmillan

Abstract: Abstract In this chapter we first review the theoretical and empirical work on fractional integration and cointegration, placing special emphasis on the estimation procedures for fractionally cointegrated systems. An empirical application is then carried out using some of the more recently developed techniques in this area. In particular, we investigate the purchasing power parity hypothesis for four bivariate price series, the US (“domestic”) versus the “foreign” countries Australia, Canada, Italy and the UK. Fractional cointegration is found in the US-UK relationship.

Keywords: Exchange Rate; Ordinary Little Square; Unit Root; Real Exchange Rate; Real Interest Rate (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-24440-5_10

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DOI: 10.1057/9780230244405_10

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