Nonstationary Time Series Analysis and Cointegration

By Colin P. Hargreaves | Go to book overview

Table A2. The Four Primary Breaks in M1
Date Break
£×106 per cent
M1
after break
Explanation
1971(4) +403 +3.8
+3.9
11088
10765
(NSA)
(SA)
A break occurs '... due to the
incorporation of new information
collected from the London clearing
banks ... on the sector split of current
and deposit accounts ...'. (p. 25)
1975(2) +618 +4.1
+4.0
15791
15929
(NSA)
(SA)
'New, more comprehensive, statistical
returns introduced in May 1975 further
reduced the estimation necessary to
calculate M1 ...'. (p. 26)
1976(1) -266 -1.5
-1.5
17421
17588
(NSA)
(SA)
'This is due to the incorporation of
data on public corporations' holdings
of notes and coin ...', i.e., which are
not included in M1. (pp. 26-27)
1981(4) +208
1
+6.1
+6.3
35956
35257
(NSA)
(SA)
'... the 'monetary sector' was
introduced in place of the 'banking
sector'; amongst others, this brought
the [Trustee Savings Banks] into the
monetary sector.' (pp. 12, 28)
Source for quotes and breaks: Topping and Bishop ( 1989); see their Table 2(a) for breaks.
Units: £ million, unless otherwise noted.

APPENDIX B. SEQUENTIAL REDUCTION ANALYSIS
This appendix describes a sequential reduction from the general ADL model in Table 5 to the parsimonious ECM in (39). Many other 'routes' for the reduction are possible. However, the values of the F-statistics for this sequence are small, implying that the F-statistics for other routes are unlikely to be statistically significant.First, the model in Table 5 is rewritten as an equivalent ECM representation. Two types of transformations are used. Levels and lagged levels are written as differences and a current or lagged level; and levels on two variables are written as a differential between the two variables and the level of one of the variables. See Ericsson, Campos, and Tran ( 1990) for a motivation and further discussion. The specific transformations are:
1. nominal money m and prices p are transformed to real money m - p and prices;
2. the interest rates R3 and Rra are transformed to the spread R* and Rra;

-216-

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Nonstationary Time Series Analysis and Cointegration
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • List of Figures vii
  • List of Tables xiii
  • List of Contributors xv
  • Foreword xvii
  • 1 - Introduction 1
  • References 8
  • 2 - Towards a Theory of Economic Forecasting 9
  • Appendix 48
  • References 50
  • 3 - Bayes Models and Forecasts of Australian Macroeconomic Time Series 53
  • References 86
  • 4 - A Review of Methods of Estimating Cointegrating Relationships 87
  • References 129
  • 5 - A Test of the Null Hypothesis of Cointegration 133
  • References 151
  • 6 - Modelling Seasonal Variation 153
  • References 176
  • 7 - Cointegration, Seasonality, Encompassing, and the Demand for Money in the Uk 179
  • Appendix A. the Data 214
  • Appendix B. Sequential Reduction Analysis 216
  • References 220
  • 8 - Evaluating a Real Business Cycle Model 225
  • Appendix 252
  • References 254
  • 9 - Misspecification Versus Bubbles in the Cagan Hyperinflation Model 257
  • References 281
  • 10 Regime Switching with Time-Varying Transition Probabilities 283
  • Appendix 299
  • References 302
  • Name Index 303
  • Subject Index 307
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