This paper analyses the properties of mutual encompassing and its relationship to the KLIC equivalence between statistical models. It is shown that models are KLIC equivalent if and only if they are mutually encompassing and mutually Cox-encompassing. Further, within the exponential family...

Models based on economic theory have serious problems forecasting exchange rates better than simple univariate driftless random walk models, especially at short horizons. Multivariate time series models suffer from the same problem. In this paper, we propose to forecast exchange rates with a...

We show how the use of panel data methods such as those proposed in single equations by Kao and Pedroni or in systems by Larsson and Lyhagen to investigate economic hypotheses such as purchading power pariety or the term structure of interest rates may be affected by the existence of cross-unit...