Edmunds.com v. Humankind Design

JEL classification: C32, C5

Fractional Integration Versus Structural Change: Testing the Convergence of CO2 Emissions

This paper assesses the stochastic convergence of relative CO₂ emissions within 28 OECD countries over the period 1950–2013. Using the local Whittle estimator and some of its variants we assess whether relative per capita CO₂ emissions are long memory processes which, although highly persistent, may revert to their mean/trend in the long run thereby indicating evidence of stochastic convergence. Furthermore, we test whether (possibly) slow convergence or the complete lack of it may be the result of structural changes to the deterministics of each of the relative per-capita emissions series by means of the tests of Berkes et al. (Ann Stat 1140–1165, 2006) and Mayoral (Oxford Bull Econ Stat 74(2):278–305, 2012). Our results show relatively weak support for stochastic convergence of CO₂ emissions, indicating that only between 30 and 40% of the countries converge to the OECD average in a stochastic sense. This weak evidence disappears if we enlarge the sample to include 4 out of the 5 BRICS, indicating that our results are not robust to the inclusion of countries which are experiencing rates of growth which are far larger than those of the OECD members. Our results also decisively indicate that a slow or lack of convergence is not the results of a structural break in the relative CO₂ emissions series

Fractional Integration and Cointegration: Testing the Term Structure of Interest Rates

The expectation hypothesis suggests there exists long run equilibrium of interest rate term structure. Two theoretical approaches proposed by Campbell and Shiller (1987) and Hall el al. (1992) suggest that the term spread of long-term and short-term interest rates should be a stationary I(0) process. However, an empirically non stationary term spread or rejection of cointegration between long and short interest rates, in the traditional sense need not to be considered against the simple theoretical model. It is likely that the dichotomy between I(1) or I(0) and/or integer values of cointegration are environments which are too restrictive to model the term structure. In this paper, we evaluate and apply some recent techniques on testing fractional integration and propose the use of a residual based approach which uses the Exact Local Whittle Estimator. The method is then used to investigate the term structure in the UK and the US.Term Structure, Long Memory, Fractional Integration, Fractional Cointegration, Local Whittle Estimation

Testing the law of one-price in the US gasoline market: a long memory approach

This paper aims to shed new light on ”law of one-price” in the United States’ gasoline market over the period June-2003-December-2019. Specifically, we test for convergence of the retail prices of gasoline in di↵erent US PADDs, states and cities using the Local Whittle estimator (LW) and its variants (Robinson 1995, Shimotsu and Phillips 2005). Mean/trend reversion of the relative price of each unit will imply convergence toward the average price in the US thereby offering support for the law of one-price. LW estimators allow us to consider the case where relative gasoline price are fractionally integrated process and may display long memory implying a slow process of convergence. The results obtained generally o↵er support for the law of one-price albeit with significant di↵erences in the rate of convergence between PADDs, States and Cities

Testing the law of one-price in the US gasoline market:a long memory approach

This paper aims to shed new light on“law of one-price” in the United States’ gasoline market over the period June-2003–December-2019. Specifically, we test for convergence of the retail prices of gasoline in different US PADDs, states and cities using the Local Whittle estimator (LW) and its variants (Robinson 1995, Shimotsu and Phillips 2005). Mean/trend reversion of the relative price of each unit will imply convergence toward the average price in the US thereby offering support for the law of one-price. LW estimators allow us to consider the case where relative gasoline price are fractionally integrated process and may display long memory implying a slow process of convergence. The results obtained generally offer support for the law of one-price albeit with significant differences in the rate of convergence between PADDs, States and Cities. In detail, a slow convergence (long memory process) is observed for PADD3 (Gulf Coast), PADD5 (West Coast) and then confirmed at the level of States (California, Texas and Washington) and at the level of Cities (Los Angeles, San Francisco and Houston). Among the cities, two of four empirical model employed find a slow convergence process is also in the cities of New York, Cleveland and Miami.</p

Testing the law of one-price in the US gasoline market:a long memory approach

This paper aims to shed new light on“law of one-price” in the United States’ gasoline market over the period June-2003–December-2019. Specifically, we test for convergence of the retail prices of gasoline in different US PADDs, states and cities using the Local Whittle estimator (LW) and its variants (Robinson 1995, Shimotsu and Phillips 2005). Mean/trend reversion of the relative price of each unit will imply convergence toward the average price in the US thereby offering support for the law of one-price. LW estimators allow us to consider the case where relative gasoline price are fractionally integrated process and may display long memory implying a slow process of convergence. The results obtained generally offer support for the law of one-price albeit with significant differences in the rate of convergence between PADDs, States and Cities. In detail, a slow convergence (long memory process) is observed for PADD3 (Gulf Coast), PADD5 (West Coast) and then confirmed at the level of States (California, Texas and Washington) and at the level of Cities (Los Angeles, San Francisco and Houston). Among the cities, two of four empirical model employed find a slow convergence process is also in the cities of New York, Cleveland and Miami.</p