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An I(2) Cointegration Analysis of Price and Quantity Formation in Danish Manufactured Exports

Author

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  • Heino Bohn Nielsen

    (Institute of Economics, University of Copenhagen)

Abstract

The long-run and short-run structure of the Danish manufacturing export sector is analyzed within a cointegrated vector autoregressive model. The price variables of the analysis can be characterized as integrated of second order, I(2), but long-run homogeneity seems to cancel the I(2)-trend allowing the analysis of a transformed data set to take place within the cointegrated I(1) framework. Two long-run relations are found and identified as a demand-relation for Danish exports and a polynomially cointegrated price relation. In the price formation a large weight to foreign prices and an effect from the rate of inflation to the steady-state markup are found. The latter effect is interpreted as an element of caution in the price setting in an inflationary environment. To characterize the short-run behavior of the Danish export-sector a structural representation of the model is developed

Suggested Citation

  • Heino Bohn Nielsen, 2001. "An I(2) Cointegration Analysis of Price and Quantity Formation in Danish Manufactured Exports," Discussion Papers 01-01, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:0101
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    File URL: http://www.econ.ku.dk/english/research/publications/wp/2001/0101.pdf/
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    Citations

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    Cited by:

    1. Juergen Amann & Paul Middleditch, 2017. "Growth in a time of austerity: evidence from the UK," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(4), pages 349-375, September.
    2. Bernardina Algieri, 2011. "Modelling export equations using an unobserved component model: the case of the Euro Area and its competitors," Empirical Economics, Springer, vol. 41(3), pages 593-637, December.

    More about this item

    Keywords

    Cointegration; I(2); Export Pricing; Market-shares; Small Open Economy;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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