Standard unit root tests and cointegration tests are sensitive to atypical events such as outliers and structural breaks. This paper uses outlier robust estimation techniques to reduce the impact of these events on cointegration analysis. As a byproduct of computing the robust estimator, we...

The tendency for changes in the federal funds rate to be implemented gradually has been considered evidence of an interest rate smoothing objective for the Federal Reserve. This paper investigates whether gradual funds rate movements can be explained by the dynamic structure of the economy and...

The traditional macroeconomic models have been subjects of strong debates because they are based on structural restrictions imposed by a particular economic theory. Nevertheless, the main objective of this paper is not to reject models but to apply a complementary methodology known as the Vector...

Some past studies analyzed Spanish monetary policy with the standard VAR. Their problem is that this method obliges researchers to impose a certain extreme form of the short run policy rule on their models. Hence, it does not allow researchers to study the possibility of structural changes in...

This paper tests for nonlinearity in a standard vector autoregression including output, prices, and money supply, using an estimation strategy that is consistent with a wide range of structural macroeconomic models. Shocks to the money supply are found to have stronger output effects and weaker...

In this paper, a vector autoregression model (VAR) is proposed in order to test uncovered interest parity (UIP) in the foreign exchange market. Consider a VAR system of the spot exchange rate (yen/dollar), the domestic (US) interest rate and the foreign (Japanese) interest rate, describing the...

There has been considerable recent interest in testing for a unit root in autoregressive models, especially in the context of cointegration models in econometrics. The likelihood ratio test for a unit root has non-standard asymptotic behaviour. In particular, when the errors are Gaussian, the...