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Long Memory in Angolan Macroeconomic Series: Mean Reversion versus Explosive Behaviour
Author(s) -
Barros Carlos P.,
Caporale Guglielmo Maria,
GilAlana Luis A.
Publication year - 2014
Publication title -
african development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.654
H-Index - 32
eISSN - 1467-8268
pISSN - 1017-6772
DOI - 10.1111/1467-8268.12064
Subject(s) - mean reversion , cointegration , univariate , economics , econometrics , exchange rate , bivariate analysis , series (stratigraphy) , long memory , inflation (cosmology) , order of integration (calculus) , mathematics , multivariate statistics , statistics , macroeconomics , volatility (finance) , paleontology , mathematical analysis , physics , biology , theoretical physics
This study examines the time series behaviour of several Angolan macroeconomic variables, using monthly data from August 1996 to June 2011. The series are the inflation rate, M1, M2, the exchange rate at the beginning and the end of the period, and the monthly average exchange rate. In the first stage univariate fractional integration models are estimated in order to determine whether shocks to the variables have transitory or permanent effects. In the second stage fractional cointegration techniques are applied to test for the existence of long‐run equilibrium relationships between the variables of interest. The results suggest a high degree of persistence in the individual series (that are not mean‐reverting) and the existence of bivariate long‐run cointegrating relationships between prices and money, and prices and nominal exchange rates.