Long-run pass-through from the exchange rate to import prices in African countries

This paper investigates the extent of pass-through from the nominal exchange rate to import prices for a sample of nineteen African countries. The methodology is based on panel data cointegration testing. Using annual data extending back to 1971, long-run pass-through can be best described as a fairly balanced combination of local-currency and producer-currency pricing. However, this paper offers additional insight from a moving window approach that indicates declining long-run pass-through, accompanied by decreasing inflation, occurring since the mid-1990s

How convergent are regional house prices in the United Kingdom? Some new evidence from panel data unit root testing

Using a variety of econometric methods, existing studies have failed to reach a consensus on whether or not UK regional house prices are engaged in kong-run equilibrium relationships with each other. Using data for the 197302005 study period, this study offers a novel approach to this debate through the application of unit root testing within a seemingly unrelated regression framework. It is argued that there exist significant advantages in this approach over and above existing univariate and panel data unit root testing procedures. The results indicate that the majority of UK regions exhibit regional house price convergence. However, there is an east-west split in terms of whether regional house prices have a tendency towards long-run equilibrium relationship with UK prices as whole. This is also evidence of considerable heterogeneity in the regional speeds of adjustment towards long-run equilibrium

Is a low-inflation environment associated with reduced exchange rate pass through?

This paper investigates the extent of pass through from the US dollar exchange rate to consumer prices in the European Union. A relatively new line of empirical research is pursued that considers whether or not the extent of exchange rate pass through is related to the inflationary environment. In contrast to previous empirical studies, recently developed panel data cointegrating techniques to measure long run pass through are employed. While there is evidence that long-run pass through has declined since the 1970s, it actually increased during the early ERM years despite the presence of lower inflation

Is a more stable exchange rate associated with reduced exchange rate pass-through?

Pass-through from the nominal effective exchange rate to import prices is modelled within a regime-switching environment. Evidence suggests that exchange rate pass through can be characterised as regime-specific where the probability of switching between regimes is influenced by the extent of exchange rate volatility

New evidence on long-run output convergence among Latin American countries

This study assesses long-run real per capita output convergence among selected Latin American countries. The empirical investigation, however, is based on an alternative approach. Strong convergence is determined on the basis of the first largest principal component, based on income differences with respect to a chosen base country, being stationary. The qualitative outcome of the test is invariant to the choice of base country and, compared to alternative multivariate tests for long-run convergence, this methodology places less demands on limited data sets. Using annual data for the period 1960-2000, strong convergence is confirmed for the Central American Common Market. However, an amended version of the test confirms weaker long-run convergence in the case of the Latin American Integration Association countries.output convergence, Latin America, common trends

Purchasing Power Parity and the Fractional Integration of the Real Exchange Rate: New Evidence for Less Developed Countries

This study tests for relative purchasing power parity for a sample of thirty less developed countries. The empirical analysis is based on testing for the fractional integration of real exchange rates. Using quarterly data covering the period 1973-2001, there is evidence against purchasing power parity for the vast majority of less developed countries using ADF unit root tests. However, we find that the real exchange rates of upto eight countries are fractionally integrated thereby suggesting that mean-reversion is by no means a rare phenomenon. There is mixed evidence that purchasing power parity is restricted to high inflation less developed countries.

The Output-Inflation Trade-off in African Less Developed Countries

This paper investigates the nature of the short-run output-inflation trade-off and policy effectiveness in African less developed countries. Using a sample of thirteen countries over the period 1960-98, cointegration and error correction modelling suggest that the impacts on inflation and real output growth from a shock to nominal aggregate demand will be of the ratio one-sixth to five-sixths. Furthermore, this study finds that the short-run potency of demand-side policy on inflation (real output growth) is positively (inversely) related to the variability of nominal income shocks rather than the underlying rate of inflation. While the speed of adjustment towards long-run equilibrium between price and nominal output is fairly sluggish, it is concluded that the New Classical perspective on the trade-off is applicable in the case of African economies. The New Keynesian perspective, which emphasises wage and price rigidities and policy effectiveness, is probably of lesser relevance.

IS LONG-RUN OUTPUT CONVERGENCE ASSOCIATED WITH INTERNATIONAL COOPERATION? SOME NEW EVIDENCE FOR SELECTED AFRICAN COUNTRIES

This study assesses long-run real per capita income convergence among selected African countries. The empirical investigation is based on an alternative approach. Strong convergence is determined on the basis of the first largest principal component, based on income differences with respect to a chosen base country, being stationary. This qualitative outcome of the test is invariant to the choice of base country and, compared to alternative multivariate tests for long-run convergence, this methodology places less demands on limited data sets. Using annual data for the period 1960-2000, strong convergence is confirmed for the Communaute Financiere Africaine and South African Customs Union countries. An amended version of the test is unable to confirm weaker long-run convergence in the case of the Economic Community of West African States countries.Africa, Common Trends, Output Convergence

Okun’s law, asymmetries and jobless recoveries in the United States: A Markov-switching approach

This paper offers a new perspective on Markov regime-switching approaches to asymmetries in Okun’s law by modeling the existing approaches as special cases. Prevailing models assume either asymmetry between unemployment and output across regimes or asymmetry within a single regime. Our specification combines both approaches. Our empirical results give an insight into the apparent ‘jobless recovery’ experiences that began in the United States in 1991 and 2001

Real convergence and regime-switching among EU accession countries

Real convergence among the ten EU 2004 accession economies is investigated with respect to long-run real interest parity. We employ a novel approach where unit-root tests for real interest differentials are embedded within a Markov regime-switching framework. Whereas standard univariate unit-root tests provide mixed support for parity, we find parity is present in all cases where differentials either switch between regimes of stationary and non-stationarity behaviour, or between alternative regimes of stationarity characterized by differing degrees of persistence. Further insights are obtained from the inferred probabilities of being in each regime, and the regime-switching nature of the differential variances