Nonlinear Error Correction: The Case of Money Demand in the United Kingdom (1878–2000)

Escribano, Álvaro

doi:10.1017/s1365100503030013

Cited by 41 publications

(58 citation statements)

References 62 publications

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“…However, it is not clear whether the error correction adjustment (equilibrium correction) is linear as in Engle and Granger (1987) or is nonlinear/asymmetric as in Escribano (1986Escribano ( , 2004, Escribano and Granger (1998) and Escribano and Pfann (1998).…”

Section: Nonlinear and Asymmetric Error Correction Modelsmentioning

confidence: 99%

Nonlinear and asymmetric pricing behaviour in the Spanish gasoline market

Escribano

Torrado

2018

Studies in Nonlinear Dynamics &Amp; Econometrics

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Over the last decades a transition from a state-own monopoly to a private business took place in the Spanish fuel sector. To figure out whether downstream prices react differently to upstream price increases than to price decreases, alternative dynamic nonlinear and asymmetric error correction models are applied to weekly price data. This paper analyse the existence of price asymmetries in the fuel market in Spain during the 2011-2016 period. In comparison with traditional asymmetric price theory literature, this paper introduces a new double threshold error correction (ECM) model (DT-ECM) and new double logistic ECM models and compares them with more common linear ECM, time varying parameter models (TV-ECM), threshold autoregressive models (T-ECM), smooth transition autoregressive (STAR) models and nonlinear error correction (Logistic-ECM) and double threshold Logistic (DT-Logistic ECM). The nonlinear and asymmetric results found show that sophisticated bivariate long-run asymmetries are present in the prices of the fuel sector and that those price reactions depend on whether the oil price increases or decreases, on the stage of the production, the distribution chain as well as on the period considered.JEL classification: B23, C24, C52, D43, L13, L71.

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Section: Nonlinear and Asymmetric Error Correction Modelsmentioning

confidence: 99%

Nonlinear and asymmetric pricing behaviour in the Spanish gasoline market

Escribano

Torrado

2018

Studies in Nonlinear Dynamics &Amp; Econometrics

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“…When we test the null hypothesis of non-cointegration between V and RNA based on the residuals of the EG test statistic we obtain a value of −1.7, and therefore we cannot reject the null hypothesis of non-cointegration at the 5% significance level. This result contradicts the ECM test carried out in the nonlinear error correction model, see Escribano (2004).…”

Section: Linear Cointegration With Structural Changes In the Cointegrmentioning

confidence: 61%

“…Few extensions of the linear framework have been performed in the context of nonlinear error correction (NEC), see Escribano (1986Escribano ( , 1987bEscribano ( , 2004 generated as x t = w t + t , while the lower one corresponds to y t = g(w t ) + ξ t , where g(·) represents a third-order polynomial of its argument random walk variable w t , and t are normally distributed.…”

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confidence: 99%

Testing for cointegration using induced-order statistics

Escribano

Santos

Sipols

2007

Computational Statistics

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In this paper we explore the usefulness of induced-order statistics in the characterization of integrated series and of cointegration relationships. We propose a non-parametric test statistic for testing the null hypothesis of two independent random walks against wide cointegrating alternatives including monotonic nonlinearities and certain types of level shifts in the cointegration relationship. We call our testing device the induced-order cointegration test (IOC), since it is constructed from the induced-order statistics of the series, and we derive its limiting distribution. This non-parametric statistic endows the test with a number of desirable properties: invariance to monotonic transformations of the series, and robustness for the presence of important parameter shifts. By Monte Carlo simulations we analyze the small sample properties of this test. Our simulation results show the robustness of the IOC test against departures from linear and constant parameter models.

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“…Valadkhani (2005) examined the determinants of M2 demand over the 1976-2002 period and found it to be cointegrated with real income, the rate of return on 10-year Treasury bonds, and cash and inflation rates, with an income elasticity of M2 demand close to unity. Felmingham and Zhang (2001) examined M2 demand over the 2 Other studies that found no evidence of instability in money demand functions include Hayo (2000) for Austria, Juselius (1998) for Denmark, Nielson et al (2004) for Italy, Bahmani-Oskooee and Economidou (2005) for Greece, Gerlach-Kristen (2001) for Switzerland, and Nielsen (2004) and Escribano (2004) for the UK.…”

Section: The Case Of Australiamentioning

confidence: 99%