PURCHASING POWER PARITY IN CENTRAL AND EASTERN EUROPEAN COUNTRIES: AN ANALYSIS OF UNIT ROOTS AND NONLINEARITIES

The aim of this paper is to analyse the empirical fulfilment of PPP in a number of Central and Eastern European countries. For this purpose we apply two different unit root tests in order to control for two sources of nonlinearities, i.e. Bierens (1997) and Kapetanios, Shin and Snell (2003). We find that PPP holds in most of these countries once account has been taken of nonlinear deterministic trends and smooth transitions.PPP, Real Exchange Rate, Unit Roots, nonlinearities, Central and East Europe

Fiscal shocks and budget balance persistence in the EU countries from Central and Eastern Europe

This paper analyses the time series properties of the fiscal balance in the 10 EU countries from Central and Eastern Europe. The persistence of shocks in the variable has been analysed by means of unit root tests that account for the possibility of non-linearities and structural changes. The results of the linear and non-linear unit root tests find only mild evidence in favour of the stationarity hypothesis, with asymmetric effects present in a few cases. After controlling for structural changes in the data generation process, the results point to stochastic stationarity of the series. Thus, in spite relatively steady headline figures, the public balance processes exhibit substantial instability in the EU countries from Central and Eastern Europe.Unit roots, structural breaks, budget balance, EU

Further evidence on the Real Interest Rate Parity hypothesis in Central and Eastern European Countries: unit roots and nonlinearities

This paper analyses the empirical fulfilment of the Real Interest Rate Parity (RIRP) theory for a pool of Central and Eastern European Countries. To do so, we apply the recently developed Ng and Perron (2001) unit root tests, that are corrected versions of existing unit root tests and the Kapetanios et al. (2003) unit root test which generalises the alternative hypothesis to the globally stationary smooth transition autoregression model. Our results point to the existence of evidence in favour of the empirical fulfilment of the RIRP, in particular, when taking into account the possibility of nonlinearities in the real interest rate differential.Real Interest Rate parity, Unit Roots, nonlinearities, Central and East Europe.

Inflation persistence and asymmetries: evidence for African countries

In this paper we aim at testing the inflation persistence hypothesis as well as modelling (using logistic smooth transition autoregressive, LSTAR, models) the long run behaviour of inflation rates in a pool of African countries. In order to do so, we rely on unit root tests applied to nonlinear models, i.e. Kapetanios et al. (2003). The results point to the non-persistence of inflation hypothesis for most of the countries. In addition, the estimated models are stable in the sense that the variable tends to remain in the regime (low inflation or high inflation) once reached and changes between regimes are only achieved after a shock.Inflation, Persistence, Unit Roots, Nonlinearities.

Inflation persistence: Implication for a monetary union in the Caribbean

In this paper we aim to shed some light on the potential for creating a monetary union in the Caribbean. We analyse the inflation rates for twelve countries using various time series methods. The results show that the inflation rates are mean reverting processes and that there is evidence of a convergence club in inflation rates within the area, which contradicts previous studies. Our contribution implies good news for the creation of a common central bank in the Caribbean.Caribbean, inflation persistence, monetary union and unit roots

Nonlinearities in real exchange rate determination: do African exchange rates follow a radom walk?

In this paper we aim at modelling the long run behaviour of the Real Effective Exchange Rates (REER) for a pool of African countries. Not much attention has been paid to this group of countries, in particular, to the existence of nonlinearities in the long run path of such a variable. Controlling for two sources of nonlinearites, i.e. asymmetric adjustment to equilibrium and nonlinear deterministic trends allows us to gain some insight about the behaviour of the African REER. We find that these sources of nonlinearites help us to explain the apparent unit root behaviour found applying linear unit root tests for most of the countries.PPP, Real Exchange Rates, Unit roots, Nonlinearities.

Unemployment and common smooth transition trends in Central and Eastern European Countries

In the present paper we analyse the existence of common nonlinear trends in several of Central and Eastern European Countries in order to gain some insight about the degree of labour market integration within the area. In order to do so, we test for the order of integration of the unemployment rates, by applying the Leybourne et al. (1998) and Kapetanios et al. (2003) nonlinear unit root tests. Our results pinpoint the fact that five up to eight unemployment rates are stationary around a nonlinear trend and, by means of Anderson and Vahid (1998) approach, we also find that there is a common trend that drives the long run behaviour of that variable in these countries.Unemployment, Central and Eastern Europe, unit roots, smooth transition, nonlinearities.

Testing for convergence among Mercosur countries

The aim of this paper is to analyse the existence of price convergence in Mercosur. Two variables are considered, Consumer Price Indices to assess convergence in the goods and services markets and real interest rates, to analyse convergence in the money markets. The univariate analysis points only to convergence in real interest rates, whilst the multivariate analysis provides evidence of common trends in both markets.Mercosur, economic integration, unit roots, nonlinearities, co-trending.

Is real GDP per capita a stationary process? Smooth transitions, nonlinear trends and unit root testing

The aim of this paper is to provide additional evidence about the order of integration of constant price GDP per capita in a selection of countries. It does so by taking into account the possibility of non-linear deterministic trends and of asymmetric adjustment towards equilibrium. We find evidence of a global stationary ESTAR process around a nonlinear deterministic trend in almost half of the selected countries. These results show that nonlinearities affect real GDP series. By neglecting them, one can draw misleading conclusions from unit root tests. Specifically, the paper questions the so-called stylised fact of a near unit root which has so influenced macroeconomic thought over the past two decades.Real GDP per capita, Unit root tests, Persistence, Nonlinearities, Smooth transitions

Exploitation and the class struggle

This paper contributes to our understanding of the determinants and dynamics of Marxian exploitation using quarterly UK data, 1955-2008. Initially a simple model is introduced for the purpose of defining exploitation and its component parts, before elaborating on theoretical issues which are important in estimating the rate of exploitation. In the empirical analysis we seek to explain the effect of class struggle, for the UK economy, using quarterly data. Attention is paid to three forces which are traditionally seen as drivers of power in the class struggle: (i) political party; (ii) the size of the “reserve army” of the unemployed; (iii) working class militancy. Our results suggest a positive impact of unemployment on the rate of exploitation, and that growing working class militancy tends to diminish the rate. Changes in political party affect the rate of exploitation in a counter-intuitive way, with a positive short-run relationship between the rate and movements to left-wing government.quantitative Marxism, exploitation, class conflict