Common cyclical features analysis in VAR models with cointegration

Hecq, Alain; Palm, Franz C.; Urbain, Jean‐Pierre

doi:10.1016/j.jeconom.2005.01.025

Cited by 51 publications

(62 citation statements)

References 25 publications

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“…The PSCCF specification does not require contemporaneous synchronization among the cycles in order to reduce to number of cyclical components and allows some cycles to lead or lag the others. The third notion of common cycles is the weak form serial correlation common features (WF) of Hecq et al (2000Hecq et al ( , 2002Hecq et al ( , 2006. The WF applies to Δ in deviations from the error correction terms ′ −1 , i.e., Δ − ′ −1 , so it requires both Δ and ′ −1 have the same serial correlation structure.…”

Section: Common Features and Common-cyclesmentioning

confidence: 99%

“…Hecq et al (2000Hecq et al ( , 2002Hecq et al ( , 2006 introduces a weak form (WF) serial correlation common features notion that relaxes these restrictions.…”

Section: Common Features and Common-cyclesmentioning

confidence: 99%

“…Third, we examine the existence of common cycles (i.e. co-movement over the short run), by using the following test statistics: Weak Form (WF) reduced ranked structure test (Hecq et al 2000(Hecq et al , 2002(Hecq et al , 2006; Serial Correlation Common Features (SCCF) (Engle and Kozicki, 1993;Vahid and Engle, 1993), and; Polynomial Serial Correlation Common Features (PSCCF) Hecq, 2001, 2003). Finally, we conduct multivariate variance decomposition and impulse response analyses to examine the relative importance of permanent and transitory innovations in explaining variations in WTI oil and S&P500 stock prices.…”

Section: Introductionmentioning

confidence: 99%

“…First, based on the PSCCF Hecq, 2001, 2003) approach we allow for non-contemporaneous common cyclical movements among the I(1) time series. Second, the WF structure used in the paper (Hecq et al 2000(Hecq et al , 2002(Hecq et al , 2006 allows for the presence of short-and long-run comovements that are generated from different factors. A third advantage of our approach compared to the previous approaches is the flexibility to allow for imposing the implied common trends and common features reduced rank structures on the estimated model.…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Common cycles and common trends in the stock and oil markets: Evidence from more than 150 years of data

2017

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This paper investigates the role of permanent and transitory shocks, within the framework of common cycles and common trends, in explaining stock and oil prices. We perform a multivariate variance decomposition analysis of monthly data on the West Texas Intermediate (WTI) oil price and the S&P500. The dataset used in the study spans a long period of 150 years and therefore contains a rich history to examine both the short-and longrun comovement properties of oil and stock prices. Given that the oil and stock markets might comove both in the short-and long-run, it is of interest to see the relative impacts of transitory and permanent shocks on both variables. We find that (log) oil price and (log) S&P 500 share a common stochastic trend for our full sample of September 1859 to July 2015, but a common cycle only exists during the post-WW II period. Full and post-WW II samples have quite different common feature estimates in terms of the impact of permanent and transitory shocks as measured by the impulse responses and forecast error variance decompositions. We also find that in the short-run oil is driven mostly by cycles (transitory shocks) and stock market is mostly driven by permanent shocks. But, permanent shocks dominate in the long-run.1

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Section: Common Features and Common-cyclesmentioning

confidence: 99%

“…Hecq et al (2000Hecq et al ( , 2002Hecq et al ( , 2006 introduces a weak form (WF) serial correlation common features notion that relaxes these restrictions.…”

Section: Common Features and Common-cyclesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Common cycles and common trends in the stock and oil markets: Evidence from more than 150 years of data

2017

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“…The series are derived from the Total Economy Database. 10 We have used on purpose the same series as in Hecq et al (2006) because it emerged there that it was not obvious to determine a priori the variables to be included in a common trend, common cycle analysis. Table 5 reports the list of these countries as well as the univariate ARMA models and outliers we have identi…ed using the software program Tramo/Seats implemented in Eviews 6 (see Gómez and Maravall, 1996).…”

Section: Analysis Of Per Capita Real Gdp In Latin Americamentioning

confidence: 99%

Studying Co-Movements in Large Multivariate Data Prior to Multivariate Modelling

2008

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The role of permanent and transitory shocks in explaining international health expenditures

Narayan

Narayan²

2007

Health Economics

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While there is a growing literature that examines the issue of cointegration (co-movement over the long run) among health expenditures, there are no studies that examine the issue of common cycles (co-movement over the short run) among health expenditures. We undertake a multivariate variance decomposition analysis of per capita health expenditures of the USA, the UK, Japan, Canada, and Switzerland based on a common-trend-common-cycle restriction framework, to examine the relative importance of permanent and transitory innovations in explaining variations in per capita health expenditures in each of the five countries. Our main finding is that transitory shocks are more important in explaining per capita health expenditures in the UK, Japan, and Switzerland, while permanent shocks dominate variations in per capita health expenditures in the USA and Canada over short horizons.

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Common cyclical features analysis in VAR models with cointegration

Cited by 51 publications

References 25 publications

Common cycles and common trends in the stock and oil markets: Evidence from more than 150 years of data

Common cycles and common trends in the stock and oil markets: Evidence from more than 150 years of data

Studying Co-Movements in Large Multivariate Data Prior to Multivariate Modelling

The role of permanent and transitory shocks in explaining international health expenditures

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