The degree of independence in goods and capital markets : an econometric degustation

Abstract

The purposes of this thesis are manifold. Nevertheless one may say that one of its governing ideas has been to make use of some o f the most advanced and recently developed state of the art time series techniques that exist to analyse actual data in as coherent, scientific and correct environment as possible. The overriding concern for this has primarily been to detach as far as it can be done, discussions o f economic matters from non-scientific and manipulative approaches where the focus as suggested by the title, has particularly been on revealing the degree of independence in capital and goods markets. In this respect, as this thesis focuses on the analysis of long-run relationships among the times series o f individual data sets, a matter of particular concern has been to avoid resorting to dummies in the process of model design and identification, beyond what has been necessary, o f course, to get residuals with sufficiently “nice” properties not to invalidate the statistical analyses. This choice has been made upon a strong and a priori personal belief that long-run common features among time series, like shared common trends, if they at all are to be considered as robust, should not be as heavily affected by outliers that they legitimate a whole battery of dummies. Thus, to let them in should, in any case, not influence the outcome o f the analysis of the long-run relationships as opposed to how they might affect a dynamic model specification. The development of fully specified dynamic models has thus been deemed less urgent, though I admit that this might potentially have had the effect o f creating certain difficulties with regard to the possibility of developing a congruent dynamic representation o f the information contained in data based on the identified long-term structures. Another important purpose of this thesis has been to spark what is meant to be a creative discussion of the different time series techniques involved, hopefully to enhance and elaborate their understanding as well as to pinpoint their implicit limitations and advantages. Finally, in some innocent way I have also tried to contribute to the econometric literature by suggesting new ways to deal with certain kinds of problems and data. Below follows a brief summary of the individual chapters and their aims.