Purchasing Power Parity, Balanced Growth, and Volatility Forecasting: An Application of Recent Developments in Time Series Analysis

By Periklis Gogas

I use recent advance in statistics and econometrics in an effort to re-test some well-known theoretical propositions, examine whether those new techniques support the theory, provide models that are better fitted to describe and forecast economic time-series. The Purchasing Power Parity theory is tested using the Fisher and Seater (1993) and King and Watson (1997) methodologies and strong evidence in support of PPP is found. I use the general class of ARCH/GARCH processes to model financial time series in an ARIMA framework and the best fitted models outperform traditional ARIMA models in terms of the forecast variance. Finally, I test the balanced growth theory and try to estimate a money demand function using the Johansen and Juselius (1993) methodology. I do not find evidence in support of the balanced growth theory and a stable money demand function, and these results are not sensitive to different monetary aggregates that are constructed according to recent index number theory.

• Format: Paperback
• Language: English
• ISBN: 1312750146
• ISBN13: 9781312750142
• Release Date: December 2014
• Publisher: Lulu.com
• Length: 168 Pages
• Weight: 0.56 lbs.
• Dimensions: 0.4" x 6.0" x 9.0"