In this study we examine the widely used Brock, Dechert and Scheinkman (BDS) test when applied to the logarithm of the standardized residuals of an estimated GARCH(1,1) model as a test for the adequacy of this specification. We review the conditions derived by De Lima (1996, Econometric Reviews,...

In this study we examine the widely used Brock, Dechert and Scheinkman (BDS) test when applied to the logarithm of the standardized residuals of an estimated GARCH(1,1) model as a test for the adequacy of this specification. We review the conditions derived by De Lima (1996, Econometric Reviews,...

In this study we examine the widely used Brock, Dechert, and Scheinkman (BDS) test when applied to the logarithm of the squared standardized residuals of an estimated GARCH(1,1) model as a test for the adequacy of this specification. We review the conditions derived by De Lima (1996; Econometric...

This paper employs a new methodology for measuring the contribution of growth and interest rate differentials to the half-life of deviations from Purchasing Power Parity (PPP). Our method is based on directly comparing the impulse response function of a VAR model, where the real exchange rate is...

We propose a new methodology for decomposing the persistence of deviations from purchasing power parity (PPP). By directly comparing the impulse response function (IRF) of a vector autoregressive (VAR) model, where the real exchange rate is Granger caused by a set of candidate variables, with...

This paper investigates the effects of imposing invalid cointegration restrictions or ignoring valid ones on the estimation, testing and forecasting properties of the bivariate, first-order, vector autoregressive (VAR(1)) model. We first consider nearly cointegrated VARs, that is, stable systems...