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Activity Number: 593
Type: Topic Contributed
Date/Time: Thursday, August 7, 2014 : 8:30 AM to 10:20 AM
Sponsor: Business and Economic Statistics Section
Abstract #311267 View Presentation
Title: Seasonal Adjustments in Nonparametric Price Transmission Analysis
Author(s): Tatyana Krivobokova*+
Companies:
Keywords: error correction models ; price transmission
Abstract:

The (threshold) vector correction model is a simple parametric model that relates two cointegrated prices time series. It is assumed that some linear combinations of two series is a random walk, while another suitable linear combination of the same time series is an autoregressive process. Then, depending on the goal, certain parametric models for the price differences (which are stationary) are estimated. In particular, it is of interest how well two markets are integrated, which is described by a certain parameter of this model. Clearly, if the underlying time series fail to fulfill the stated assumptions (e.g. due to complicated seasonal patterns), parametric models could completely fail. Therefore, we develop a different, nonparametric and much more flexible model for the price transmission analysis, which can include complex seasonal patterns and time varying cointegration parameters. The modelling and estimation is carried out using Bayesian splines.


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