The Tobit cointegrated vector autoregressive model: An application to the currency market

Wojciech Grabowski and Aleksander Welfe

Economic Modelling, 2020, vol. 89, issue C, 88-100

Abstract: The Tobit cointegrated vector autoregressive model proposed in this study extends the existing methodology by allowing the censored variable to be nonstationary. The approach requires deriving the distribution of the cointegration rank test and simulating new critical values. The empirical application refers to the currency market. It has confirmed that the exchange rate is driven by four main forces: inflation, terms of trade, the perception of the country-specific risk, and the state of the currency market. Temporary disequilibria in the currency market arise not only from the “fundamental” factors, but also from the contagion effect.

Keywords: Cointegration; Contagion effect; Exchange rate models; Censored variables (search for similar items in EconPapers)
JEL-codes: C32 C35 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999319301373
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:89:y:2020:i:c:p:88-100

DOI: 10.1016/j.econmod.2019.10.008

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().