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Convergence and Cointegration

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García Hiernaux, Alfredo and Guerrero, David (2011) Convergence and Cointegration. [ Documentos de trabajo del Instituto Complutense de Análisis Económico; nº 22, 2011, ] (Unpublished)

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Official URL: http://eprints.ucm.es/12874/


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Abstract

This paper provides a new, united, and flexible framework to measure and characterize convergence in prices. We formally define this notion and propose a model to represent a wide range of transition paths that converge to a common steady-state. Our framework enables the econometric measurement of such transi-tional behaviors and the development of testing procedures. Speci¯cally, we derive a statistical test to determine whether convergence exists and, if so, which type: as catching-up or steady-state. The application of this methodology to historic wheat prices results in a novel explanation of the convergence processes experienced during the 19th century.


Item Type:Working Paper or Technical Report
Additional Information:

JEL: C22, C32, N70, F15

Uncontrolled Keywords:Price convergence, Cointegration, Law of one price.
Subjects:Social sciences > Economics > Macroeconomics
Series Name:Documentos de trabajo del Instituto Complutense de Análisis Económico
Volume:2011
Number:22
ID Code:12874
Deposited On:16 Jun 2011 11:36
Last Modified:06 Feb 2014 09:35

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