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...

Many pricing models imply that nominal interest rates contain information on inflation expectations. This has lead to a large empirical literature that investigates the use of interest rates as predictors of future inflation. Most of these focus on the Fisher hypothesis in which the interest...

Using both semiparametric and parametric estimation methods, this paper corroborates earlier findings of fractionally integrated behaviour in the forward premium. Two new explanations are also proposed to help reconcile earlier conflicting empirical evidence on the time series properties of the...

This paper develops a new test of orthogonality based on a zero restriction on the covariance between the dependent variable and the predictor. The test provides a useful alternative to regression-based tests when conditioning variables have roots close or equal to unity. In this case standard...

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,...

This paper develops a new covariance-based test of orthogonality that may beattractive when regressors have roots close or equal to unity. In this case standard regression-based orthogonality tests can suffer from (i) size distortions and (ii) uncertainty regarding the appropriate model in which...

This paper develops a new covariance-based test of orthogonality that may be attractive when regressors have roots close or equal to unity. In this case standard regression-based orthogonality tests can suffer from (i) size distortions and (ii) uncertainty regarding the appropriate model in...