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Error-correction Model (error-correction + model)
Selected AbstractsNon-linear interest rate dynamics and forecasting: evidence for US and Australian interest ratesINTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 2 2009David G. McMillan Abstract Recent empirical finance research has suggested the potential for interest rate series to exhibit non-linear adjustment to equilibrium. This paper examines a variety of models designed to capture these effects and compares both their in-sample and out-of-sample performance with a linear alternative. Using short- and long-term interest rates we report evidence that a logistic smooth-transition error-correction model is able to best characterize the data and provide superior out-of-sample forecasts, especially for the short rate, over both linear and non-linear alternatives. This model suggests that market dynamics differ depending on whether the deviations from long-run equilibrium are above or below the threshold value. Copyright © 2007 John Wiley & Sons, Ltd. [source] The stochastic implications of rent maximization: an application to stumpage rates for timber in British ColumbiaJOURNAL OF APPLIED ECONOMETRICS, Issue 1 2004M. Ryan Haley We construct a model of rent-maximizing behaviour by a single seller of timber in the absence of a formal market, deriving the stochastic implications of rent maximization for timber prices (stumpage rates) when other input and output (lumber) prices are random. Subsequently, we examine the model's ability to describe monthly, time-series, stumpage-rate data from British Columbia, Canada between January 1979 and October 1999. Deviations of stumpage rates from their long-run trend are also structured by an error-correction model which suggests that between 13 and 20% of period-to-period changes in stumpage rates can be explained by an equilibrium adjustment term. Copyright © 2004 John Wiley & Sons, Ltd. [source] Forecasting Hong Kong's container throughput: an error-correction modelJOURNAL OF FORECASTING, Issue 1 2002Michael K. FungArticle first published online: 28 DEC 200 Abstract A three-player oligopoly model is devised to capture the competitive interaction between operators of the Hong Kong container terminals, the Hong Kong midstream and the Singapore container terminals in providing container handling services. The oligopoly model is then estimated statistically and thereby the structural parameters can be identified. The results of the estimation confirm a substitutability between the services supplied by operators of different types (terminal versus midstream) and different locations (Hong Kong versus Singapore). Moreover, the model proposed in this article generates forecasts of demand for Hong Kong's container handling services that are more accurate than those reported by the government authority, and suggests an earlier construction of new terminals to meet future demand. Copyright © 2002 John Wiley & Sons, Ltd. [source] The Dynamics of Political Attention: Public Opinion and the Queen's Speech in the United KingdomAMERICAN JOURNAL OF POLITICAL SCIENCE, Issue 4 2009Will Jennings This article represents the effect of public opinion on government attention in the form of an error-correction model where public opinion and policymaking attention coexist in a long-run equilibrium state that is subject to short-run corrections. The coexistence of policy-opinion responsiveness and punctuations in political attention is attributed to differences in theoretical conceptions of negative and positive feedback, differences in the use of time series and distributional methods, and differences in empirical responsiveness of government to public attention relative to responsiveness to public preferences. This analysis considers time-series data for the United Kingdom over the period between 1960 and 2001 on the content of the executive and legislative agenda presented at the start of each parliamentary session in the Queen's Speech coded according to the policy content framework of the U.S. Policy Agendas Project and a reconstituted public opinion dataset on Gallup's "most important problem" question. The results show short-run responsiveness of government attention to public opinion for macroeconomics, health, and labor and employment topics and long-run responsiveness for macroeconomics, health, labor and employment, education, law and order, housing, and defense. [source] Bank Interest Rate Adjustments: Are They Asymmetric?THE ECONOMIC RECORD, Issue 237 2001G.C. Lim This paper is concerned with the asymmetric adjustments between three Australian bank interest rates: a bank bill rate, a loan rate and a deposit rate. A multivariate asymmetric error-correction model is applied to capture the interplay of long-run relationships between the levels of the rates and short-run relationships between the changes in the rates. The empirical analysis, for the sample period 1990:01,2000:04, shows that interest rate adjustments, in response to positive and negative shocks, are asymmetric in the short run, but not in the long run. In particular, the results suggest that banks adjust their loan and deposit rates, in response to a change in the bank-bill rate, at a faster rate during periods of monetary easings (negative changes) than during periods of monetary tightenings (positive changes). [source] A note on the superiority of the OLS hedge ratioTHE JOURNAL OF FUTURES MARKETS, Issue 11 2005Donald Lien Suppose that spot and futures prices are generated from an error-correction model. This note demonstrates that, although the OLS model is misspecified, it provides a hedge ratio that usually outperforms the hedge ratio derived from the correct error-correction model. The opposite result is possible only when the postsample incurs a major structural change from the estimation sample. ©2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:1121,1126, 2005 [source] Estimating the optimal hedge ratio with focus information criterionTHE JOURNAL OF FUTURES MARKETS, Issue 10 2005Donald Lien In recent years, the error-correction model without lags has been used in estimating the minimum-variance hedge ratio. This article proposes the use of the same error-correction model, but with lags in spot and futures returns in estimating the hedge ratio. In choosing the lag structure, use of the Akaike information criterion (AIC) and recently proposed focus information criterion (FIC) by G. Claeskens and N. L. Hjort (2003) is suggested. The proposed methods are applied to 24 different futures contracts. Even though the FIC hedge ratio is expected to perform better in terms of mean-squared error, the AIC hedge ratio is found to perform as well as the FIC and better than the simple hedge ratios in terms of hedging effectiveness. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:1011, 1024, 2005 [source] Deviation from Purchasing Power Parity: Evidence from Malaysia, 1973,1997ASIAN ECONOMIC JOURNAL, Issue 1 2000Goh Soo Khoon This paper presents an empirical test of Purchasing Power Parity (PPP) applied to the Malaysia ringgit for the period from 1973 (CPI) and 1984 (WPI) to 1997. Consistent with other research findings, it is detected that real exchange rate follows a random walk. Using multivariate cointegration methodology for the long-run relationship between real exchange rate and certain macro-economic variables, the study provides evidence supporting a long-run relationship between the real exchange rate and the current account balance and government spending, the last two variables have been not included in previous studies of this economy. The causality test between real exchange rate with the current account balance and government spending, however, does not receive support from the error-correction model. This suggests that both government spending and current account balance are not adequate to explain the changes in ringgit real exchange rate. The puzzle still remains unsolved. [source] BUSINESS FAILURES AND MACROECONOMIC FACTORS IN THE UKBULLETIN OF ECONOMIC RESEARCH, Issue 1 2009Jia Liu G33; E42; P11 ABSTRACT We examine the interactions between business failures and macroeconomic aggregates, and specifically the accounts of policy-induced changes in the macroeconomy for the observed fluctuations of UK business failures in the period 1966,2003 using the vector error-correction model (VECM). The results demonstrate that macroeconomic aggregates, i.e., interest rate, credit, profits, inflation and business births, exert differential impacts on business failures both in the short run and in the long run. The study reveals that structural changes in the financial and real sectors during the examined period have made an impact on the way in which the macroeconomy affects business failures. In particular, business failures are increasingly reacting to monetary policy changes in the post-1980 period. Furthermore, the shocks to business failures can generate large fluctuations in macroeconomic aggregates, suggesting the importance of corporate balance sheets in financial stability and economic growth. The paper's findings carry policy implications that are related to the survival of firms in distress and finance-driven business cycles. [source] | ||||||||||||||||||||||