This article clarifies the empirical source of the debate on the effect of technology shocks on hours worked. We find that the contrasting conclusions from levels and differenced vector autoregression specifications, documented in the literature, can be explained by a small low-frequency...

Previous literature has introduced causality tests with conventional limiting distributions in I(0)/I(1) vector autoregressive (VAR) models with unknown integration orders, based on an additional surplus lag in the specification of the estimated equation, which is not included in the tests. By...

Several recent empirical studies have been forced to reject exact 1:1 cointegration between spot and forward exchange rates. Theoretically, this is shown to provide a possible explanation for the puzzling negative estimates reported from spot-return-forward-premium regressions. In particular,...

A modified version of the nonparametric level crossing random walk test is proposed, in which the crossing level is determined locally. This modification results in a test that is robust to unknown multiple structural breaks in the level and slope of the trend function under both the null and...

Predictability tests with long memory regressors may entail both size distortion and incompatibility between the orders of integration of the dependent and independent variables. Addressing both problems simultaneously, this paper proposes a two-step procedure that rebalances the predictive...

Recent literature has questioned statistical inference in predictive regressi on with persistent regressors, suggesting a possible explanation for puzzles suc h as the forward premium anomaly. We therefore revisit this puzzle using three a lternative econometric methods known to provide reliable...