Persistent shifts in equilibria are likely to arise in oligopolistic markets and may be detrimental to the measurement of conduct, related markups and intensity of competition. We develop a cointegrated VAR (vector autoregression) based approach to detect long-run changes in conduct when data...

Intertemporal shifts in conduct, such as a transition from competitive to anti-competitive behavior, induce shifts in the firms’ equilibrium price configurations. Such shifts generate non-stationary price dynamics in addition to those which originate from exogenous fundamentals. We exploit...

Several countries are concurrently experiencing historically low inflation rates and ageing populations. Is there a connection, as recently suggested by some senior central bankers? We undertake a comprehensive test of this hypothesis in a panel of 22 countries over the 1955–2010 period. We...

We study the effects of labour market imperfections and the capital stock on equilibrium unemployment. With an exogenous capital-labour ratio, stronger labour market imperfections promote equilibrium unemployment. However, the relationship between the long-run unemployment and the capital stock...

A popular strategy for estimating output gaps is to anchor them to structural economic relationships. The resulting output gaps, however, are often highly sensitive to numerous auxiliary assumptions inherent in the approach. This complicates their use in policymaking. We illustrate the point...

Ideally, early warning indicators (EWI) of banking crises should be evaluated on the basis of their performance relative to the macroprudential policy maker’s decision problem. We translate several practical aspects of this problem — such as difficulties in assessing the costs and benefits...

I apply the Johansen and Swensen (1999, 2004) method of testing exact rational expectations within the cointegrated VAR (Vector Auto-Regressive) model, to testing the New Keynesian (NK) model. This method permits the testing of rational expectation systems, while allowing for non-stationary...

I apply the Johansen and Swensen (1999, 2004) method of testing exact rational expectations within the cointegrated VAR (Vector Auto-Regressive) model, to testing the New Keynesian (NK) model. This method permits the testing of rational expectation systems, while allowing for non-stationary...

Many economic events involve initial observations that substantially deviate from long-run steady state. Initial conditions of this type have been found to impact diversely on the power of univariate unit root tests, whereas the impact on multivariate tests is largely unknown. This paper...