The Contribution of Growth and Interest Rate Differentials to the Persistence of Real Exchange Rates.

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 Granger caused by these variables with the impulse response function of a univatiate ARMA model for the real exchange rate. We show that the impulse response function of the VAR model is not, in general, the same with the impulse response function obtained from the equivalent ARMA representation, if the real exchange rate is Granger caused by other variables in the system. The difference between the two functions captures the effects of the Granger-causing variables on the half-life of deviations from PPP. Our empirical results for a set of four currencies suggest that real and nominal long term interest rate differentials and real GDP growth differentials account for 22% to 50% of the half-life of deviations from PPP.real exchange rate; persistence measures; VAR; impulse response function; PPP

The Contribution of Growth and Interest Rate Differentials to the Persistence of Real Exchange Rates

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 Granger caused by these variables with the impulse response function of a univatiate ARMA model for the real exchange rate. We show that the impulse response function of the VAR model is not, in general, the same with the impulse response function obtained from the equivalent ARMA representation, if the real exchange rate is Granger caused by other variables in the system. The difference between the two functions captures the effects of the Granger-causing variables on the half-life of deviations from PPP. Our empirical results for a set of four currencies suggest that real and nominal long term interest rate differentials and real GDP growth differentials account for 22% to 50% of the half-life of deviations from PPP.real exchange rate; persistence measures; VAR; impulse response function; PPP.

Impulse-response functions of several detectors used in flow-injection analysis

A procedure for the determination of the impulse-response function of a detector is given. Its application to photometers, ion-sensitive field effect transistors, a potentiometric detector at constant current and a voltammetric detector shows that the impulse-response function can be used to obtain specific information about the performance of the detector in the manifold. This function clearly shows the contribution of the detector to the peak broadening and how the detector generates the final signal from the presented concentration profile. From this information one could derive improvements to the detector, such as changing the construction of the detector cell, minimizing the influence of other parts of the manifold or adapting the attached electronics

EUAs and CERs: Vector Autoregression, Impulse Response Function and Cointegration Analysis

EUAs are European Union Allowances traded on the EU Emissions Trading Scheme (EU ETS), while Certified Emissions Reductions (CERs) arise from the Clean Development Mechanism under the Kyoto Protocol. These emissions assets attract an increasing attention among brokers, investors and operators on emissions markets, because they may be both used for compliance under the EU ETS (up to fixed limits). This paper proposes a statistical analysis of the inter-relationships between EUA and CER price series, by using vector autoregression, impulse response function, and cointegration analysis on daily data from March 9, 2007 to January 14, 2010. The central results show that EUAs and CERs affect each other significantly through the vector autoregression model, and react quite rapidly to shocks on each other through the impulse response function analysis. Most importantly, both price series are found to be cointegrated, with EUAs leading the price discovery process in the long-term through the vector error correction mechanism.EUA, CER, Vector Autoregression, Impulse Response Function, Cointegration, Vector Error Correction Model, EU ETS, Price Discovery.

The Dynamic Response of the Budget Balance to Tax, Spending and Output Shocks: Does Model Specification Matter?

This paper estimates how the US budget responds to shocks in taxes, spending and output. In particular, we consider the dynamic adjustment of the two budget components (taxes and spending) to such shocks. The recently developed Generalized Impulse Response Function, which takes the historical distribution of the residuals into account, is applied. We select the 'correct' specification, estimate two VAR and two VEC models and compare the results. Our chosen specification suggests that tax, spending and output shocks generate deficits in the long run while the tax and output shocks generate a surplus in the short run. Moreover, model specification matters indeed.Generalized impulse response function; Model specification; VAR; Budget deficit; Fiscal variables

INFORMATION CRITERIA FOR IMPULSE RESPONSE FUNCTION MATCHING ESTIMATION OF DSGE MODELS

We propose new information criteria for impulse response function matching estimators (IRFMEs). These estimators yield sampling distributions of the structural parameters of dynamic sto- chastic general equilibrium (DSGE) models by minimizing the distance between sample and theoretical impulse responses. First, we propose an information criterion to select only the responses that produce consistent estimates of the true but unknown structural parameters: the Valid Impulse Response Selection Criterion (VIRSC). The criterion is especially useful for mis-speci?ed models. Second, we propose a criterion to select the impulse responses that are most informative about DSGE model parameters: the Relevant Im- pulse Response Selection Criterion (RIRSC). These criteria can be used in combination to select the subset of valid impulse response functions with minimal dimension that yields asymptotically e¢ cient estimators. The criteria are general enough to apply to impulse responses estimated by VARs, local projections, and simulation methods. We show that the use of our criteria signi?cantly a§ects estimates and inference about key parameters of two well-known new Keynesian DSGE models. Monte Carlo evidence indicates that the criteria yield gains in terms of ?nite sample bias as well as o§ering tests statistics whose behavior is better approximated by ?rst order asymptotic theory. Thus, our criteria improve on existing methods used to implement IRFMEs.Output Growth Forecasts, Inflation Forecasts, Model Selection, Structural Change, Forecast Evaluation, Real-time data. Evaluation

Information criteria for impulse response function matching estimation of DSGE models

We propose a new information criterion for impulse response function matching estimators of the structural parameters of macroeconomic models. The main advantage of our procedure is that it allows the researcher to select the impulse responses that are most informative about the deep parameters, therefore reducing the bias and improving the efficiency of the estimates of the model’s parameters. We show that our method substantially changes key parameter estimates of representative dynamic stochastic general equilibrium models, thus reconciling their empirical results with the existing literature. Our criterion is general enough to apply to impulse responses estimated by vector autoregressions, local projections, and simulation methods.

The temporal impulse response function in infantile nystagmus.

Despite rapid to-and-fro motion of the retinal image that results from their incessant involuntary eye movements, persons with infantile nystagmus (IN) rarely report the perception of motion smear. We performed two experiments to determine if the reduction of perceived motion smear in persons with IN is associated with an increase in the speed of the temporal impulse response. In Experiment 1, increment thresholds were determined for pairs of successively presented flashes of a long horizontal line, presented on a 65-cd/m2 background field. The stimulus-onset asynchrony (SOA) between the first and second flash varied from 5.9 to 234 ms. In experiment 2, temporal contrast sensitivity functions were determined for a 3-cpd horizontal square-wave grating that underwent counterphase flicker at temporal frequencies between 1 and 40 Hz. Data were obtained for 2 subjects with predominantly pendular IN and 8 normal observers in Experiment 1 and for 3 subjects with IN and 4 normal observers in Experiment 2. Temporal impulse response functions (TIRFs) were estimated as the impulse response of a linear second-order system that provided the best fit to the increment threshold data in Experiment 1 and to the temporal contrast sensitivity functions in Experiment 2. Estimated TIRFs of the subjects with pendular IN have natural temporal frequencies that are significantly faster than those of normal observers (ca. 13 vs. 9 Hz), indicating an accelerated temporal response to visual stimuli. This increase in response speed is too small to account by itself for the virtual absence of perceived motion smear in subjects with IN, and additional neural mechanisms are considered

Fractional Integration Analysis and its Implications on Profitability: the Case of the Mackerel Market in the Basque Country

This paper analyses weekly prices for mackerel landed by the inshore fleet at the ports of the Basque Country in 1995-2008, using new econometric techniques never before applied to the fishing market. The idea is to learn to what extent fishermen can pass on the effects of negative shocks (e.g. fuel price increases) to their ex-vessel prices. This will give an idea of the profitability of the fishery in question. To that end, a cyclical ARFIMA model is adjusted to the series analysed, then the impulse-response function is constructed. Among other things, the behaviour of this function shows that possible increases in production costs are not being passed on to prices, which lowers the profitability of fishing. In view of these results, it is suggested that fishermen need to be able to pass the shocks that they suffer on to prices if the profitability of this fleet is to be assured.long memory, seasonality, fishing market, mackerel, impulse response function