NUMERICAL DISTRIBUTION FUNCTIONS OF FRACTIONAL UNIT ROOT AND COINTEGRATION TESTS

This paper studies the dynamic behaviour of transportation price in Peninsular Malaysia and Sabah from 2004 to 2015 using disaggregated monthly price data of consumer price index (CPI). For that, unit root tests and cointegration tests with structural breaks are incorporated. The findings indicated that (i) both Zivot and Andrews unit root test and Perron unit root test provided fairly similar results; most of the break points occurred in 2008, (ii) the variables cointegrate in the Johansen cointegration test which indicates that there is a long-run relationship and (iii) the Gregory and Hansen test also demonstrated some form of cointegration with structural break(s), especially in 2008. Overall, this study intends to match the structural break points with the comparable critical economic events

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Unit root and cointegration tests on the efficiency and biasedness of forward exchange rates

Journal of Economics and Finance ◽

10.1007/bf02920645 ◽

1993 ◽

Vol 17 (2) ◽

pp. 139-150

Author(s):

C. S. Pyun ◽

Richard D. Evans

Keyword(s):

Exchange Rates ◽

Unit Root ◽

Cointegration Tests

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Explaining India’s current account deficit: a time series perspective

Journal of Asian Business and Economic Studies ◽

10.1108/jabes-11-2018-0089 ◽

2019 ◽

Vol 26 (1) ◽

pp. 117-138

Author(s):

Harendra Kumar Behera ◽

Inder Sekhar Yadav

Keyword(s):

Current Account ◽

Unit Root ◽

Current Account Deficit ◽

Structural Break ◽

Current Account Balance ◽

Fiscal Deficit ◽

Causality Test ◽

Content Type ◽

Financial Account ◽

Cointegration Tests

Purpose The purpose of this paper is to examine the issue of high current account deficit (CAD) from various perspectives focussing its behaviour, financing pattern and sustainability for India. Design/methodology/approach To begin with the trends, composition and dynamics of CAD for India are analysed. Next, the influence of capital flows on current account is investigated using Granger non-causality test proposed by Toda and Yamamoto (1995) between current account balance (CAB) to GDP ratio and financial account balance to GDP ratio. Also, the sustainability of India’s current account is examined using different econometrics techniques. In particular, Husted’s (1992), Johansen’s cointegration and vector error correction model (VECM) is applied along with conducting unit root and structural break tests wherever applicable. Further, long-run and short-run determinants of the CAB are estimated using Johansen’s VECM. Findings The study found that the widening of CAD is due to fall in household financial savings and corporate investments. Also, it was found that a large part of India’s CAD has been financed by FDI and portfolio investments which are partly replaced by short-term volatile flows. The unit root and cointegration tests indicate a sustainable current account for India. Further, econometric analysis reveals that India’s current account is driven by fiscal deficit, terms of trade growth, inflation, real deposit rate, trade openness, relative income growth and the age dependency factor. Practical implications Since India’s CAD has widened and is expected to widen primarily due to rise in gold and oil imports, policy makers should focus on achieving phenomenal export growth so that a sustainable current account is maintained. Also, with rising working-age and skilled population, India should focus more on high-value product exports rather than low-value manufactured items. Further, on the structural side it is important to correct fiscal deficit as it is one of the important factors contributing to large CAD. Originality/value The paper is an important empirical contribution towards explaining India’s CAD over time using latest and comprehensive data and econometric models.

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