Continuous Time Econometric Model of the United Kingdom with Stochastic Trends »

The late Albert Rex Bergstrom was Emeritus Professor of Economics, a former Dean of the School of Social Studies and Pro Vice Chancellor at the University of Essex and a Fellow of the Econometric Society. He was one of the world's leading authorities on continuous time econometric modelling. Professor Bergstrom was formerly Professor of Econometrics at the University of Auckland, and Reader at the London School of Economics. His professional papers appeared in leading journals such as Econometrica and Econometric Theory. Professor Bergstrom's earlier books include The Construction and Use of Economic Models (1967), Continuous Time Econometric Modelling (1990), Statistical Inference in Continuous Time Economic Models (editor, 1976), and Stability and Inflation: Essays in Memory of A. W. Phillips (edited with A. J. L. Catt, M. H. Peston, and B. D. J. Silverstone, 1978).

Khalid Ben Nowman is Professor of Finance at the Westminster Business School, University of Westminster, in London. He previously worked at City University Business School, London Business School, University of Essex, Durham University, and University of Kent and in the banking sector at the Bank of England, First National Bank of Chicago, and Barclays Bank. Professor Nowman's papers have appeared in leading journals such as Econometric Theory, Journal of Finance, Journal of Financial and Quantitative Analysis, and the Journal of Economic Dynamics and Control.

Presents the first continuous time macroeconometric model of the United Kingdom incorporating stochastic trends.

List of Figures and Tables     xi
Foreword   Peter C. B. Phillips     xiii
Preface     xix
Introduction to Continuous Time Modelling     1
Introduction     1
Why Model in Continuous Time     3
Introduction to General Continuous Time Models     9
Continuous Time Models in Finance     18
Continuous Time Macroeconomic Modelling     31
Policy Analysis in Continuous Time Macroeconomic Models     42
Stochastic Trends in Econometric Models     45
An Outline of Contents     47
Continuous Time Econometrics with Stochastic Trends     50
Introduction     50
The Continuous Time Model     53
The Exact Discrete Model and Its VARMAX Representation     58
Estimation and Forecasting     67
Conclusion     79
Formulae for the Coefficient Matrices of Exact Discrete Model     80
Formulae for the Autocovariance Matrices     85
Model Specification     114
Introduction     114
Equations and General Properties of the Model     116
Private Consumption     125
Residential Fixed Capital     128
Employment     130
Private Non-Residential Fixed Capital     134
Output     136
Price Level     138
Wage Rate     141
Interest Rate     144
Imports     145
Non-Oil Exports     146
Transfers Abroad     147
Real Profits Interest and Dividends from Abroad     147
Cumulative Net Real Investment Abroad     149
Exchange Rate     150
Stocks     151
Conclusion     152
Derivation of General Adjustment Equations     152
Distributed Lag Relations     164
Steady State and Stability Analysis     173
Introduction     173
The Steady State     175
Stability Analysis     180
Stability and Bifurcations     192
Conclusion     197
Steady State Level Parameters     197
Transformed Model     203
Empirical Estimation of the Model and Derived Results     213
Introduction     213
Estimation from UK Data     214
Time Lag Distributions     223
Steady State and Stability Properties     232
Post-Sample Forecasting Performance      240
Conclusion     248
Linear Approximation about Sample Means     249
Data     262
References     269
Author Index     285
Subject Index     288