Conduct a bivariate nonlinear conintegration tests

Assignment Help Financial Econometrics

Reference no: EM1374370

In this paper, the possibility of nonlinear dynamic adjustment in the sugar-ethanol-oil nexus in Brazil is examined. Threshold vector error correction models are employed to test for linearity in the adjustment of prices of sugar and oil, ethanol and oil and ethanol and sugar. Strong evidence of threshold type nonlinearity is found. The results suggest that sugar and oil and ethanol and oil prices are characterised by discrete threshold behaviour, whereas sugar and ethanol can be thought of as being linearly cointegrated. Threshold estimates suggest that sugar prices adjust rapidly to a long run equilibrium, determined by oil prices, in an asymmetric manner, when disequilibria are negative. The dynamic adjustment of ethanol prices is faster when the oil-ethanol price spread widens and ethanol prices are below a critical threshold. Both sugar and ethanol prices are found to be determined by oil prices and no evidence for a causal relationship that runs from oil to ethanol to sugar is found.

Part of empirical modeling - Conduct a bivariate nonlinear co integration tests using threshold Vector Error Correction (TVEC) methodology (Hansen and Seo, 2002). Need to develop Matlab code.

Download:- thresholdVectorErrorCorrection.pdf

Reference no: EM1374370

Questions Cloud

Research topic of heat loss in a cylindrical pipe : Evaluate the heat loss per meter for each of the combinations you can figure out. Summarize the result in a graphical way, such as a table, such that they are easy to read and understand.

Find profit maximizing order quantity : A television station is planning the sale of promotional dvds. It can have dvds manufactured by one of two suppliers. Supplier A will charge the station a set up fees of $1200 plus $2 for each dvds;

Supply and demand analysis : Use supply and demand analysis to describe why equilibrium price of apples will increase and the equilibrium quantity will fall if an excise tax is levied on apples.

Multiple choice questions - supply and demand : Are you in favor of either deficit spending on the part of government or one of a balanced federal budget and budget surpluses?

Conduct a bivariate nonlinear conintegration tests : Conduct a bivariate nonlinear conintegration tests using threshold Vector Error Correction (TVEC) methodology. Need to develop Matlab code.

Discuss a us government policy on goods or services : Choose an article in a newspaper or magazine that discusses a United States government policy on goods or services.

Find the total supply in domestic market : The domestic demand and supply for sugar are Qd = 40,000 - 200 P. The foreign supply is QSF = 20,000 + 100 P. Determine the total supply of sugar in the domestic market?

Describe the linear programming problem : Interpret the components of mathematical equations that explain the linear programming problem for each of the following:

Explain the effect on dollar : Suppose that the euro zone is the home "country" and the US is the foreign country, which means that exchange rate, which has the dimensions of local currency per unit of foreign currency, is in units of euros per dollar.

User Account

All Pages