Econometric and statistical methods
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Affine Term-Structure Models: Theory and Implementation
Affine models describe the stylized time-series properties of the term structure of interest rates in a reasonable manner, they generalize relatively easily to higher dimensions, and a vast academic literature exists relating to their implementation. This combination of characteristics makes the affine class a natural introductory point for modelling interest rate dynamics. -
Evaluating Linear and Non-Linear Time-Varying Forecast-Combination Methods
This paper evaluates linear and non-linear forecast-combination methods. Among the non-linear methods, we propose a nonparametric kernel-regression weighting approach that allows maximum flexibility of the weighting parameters. -
Testing for a Structural Break in the Volatility of Real GDP Growth in Canada
This study tests for a structural break in the volatility of real GDP growth in Canada following the methodology of McConnell and Quiros (1998). A break is found in the first quarter of 1991. -
On the Nature and the Stability of the Canadian Phillips Curve
This paper empirically determines why, during the 1990s, inflation in Canada was consistently more stable than predicted by the fixed-coefficients Phillips curve. A time-varying-coefficient model, where all the parameters adjust simultaneously, shows that the behaviour of expectations was probably a major contributing factor. -
Exact Non-Parametric Tests for a Random Walk with Unknown Drift under Conditional Heteroscedasticity
This paper proposes a class of linear signed rank statistics to test for a random walk with unknown drift in the presence of arbitrary forms of conditional heteroscedasticity. -
Fractional Cointegration and the Demand for M1
Using wavelets, the author estimates the fractional order of integration of a common long-run money-demand relationship whose parameters are obtained from a full-information maximum-likelihood procedure. -
Testing the Pricing-to-Market Hypothesis: Case of the Transportation Equipment Industry
Pricing-to-market (PTM) theory suggests that monopolistic firms which export adjust their destination-specific markups in reaction to exchange rate shocks. These adjustments limit changes in the price of their exports. -
Estimating the Fractional Order of Integration of Interest Rates Using a Wavelet OLS Estimator
The debate on the order of integration of interest rates has long focused on the I(1) versus I(0) distinction. In this paper, we use instead the wavelet OLS estimator of Jensen (1999) to estimate the fractional integration parameters of several interest rates for the United States and Canada from 1948 to 1999. -
GAUSS™ Programs for the Estimation of State-Space Models with ARCH Errors: A User's Guide
State-space models have long been popular in explaining the evolution of various economic variables. This is mainly because they generally have more economic content than do others in their class of parsimonious models (for example, VARs). Yet, in spite of their advantages, use of these models until recently was limited by the assumption that all […]