The advent of advanced means of communication, faster modes of transportation and sophisticated trading technologies has facilitated economic and financial integration across the world. The emergence of globalization in the last two decades has transformed the economic outlook and perceptions of consumers, investors and policymakers. Consumers have a vast range of goods and services to choose from, investors seeking to maximize profits and minimize risks have access to markets worldwide and last, but not least, policymakers can harness the benefits accruing from international trade to abet economic growth and development. Although augmented economic and financial integration has its benefits, it does have its pitfalls as well. Highly synchronized financial and goods markets are relatively less insulated from disturbances or shocks arising in foreign markets. This synchrony makes these markets more susceptible to foreign shocks, thus, compromising their economic autonomy. Accordingly, the issue economic interdependence among countries warrants a detailed investigation. This dissertation consists of three essays. The first essay investigates exchange rate dynamics among the ASEAN-5 economies of Indonesia, Malaysia, Philippines, Singapore and Thailand. The second essay is dedicated to a detailed analysis of real and monetary interrelationships among the economies of Norway, Sweden, the UK and the US. In the third essay, the short-term and the long-term co-movements among the price of crude oil and the real exchange rates of the Canadian Dollar and the Norwegian Krone are examined. Exchange rate movements are central to international trade and finance as they directly impact the relative price of goods and services in domestic and foreign markets. Fluctuations in exchange rates can have a significant bearing on the terms of trade and the value of foreign asset holdings. Moreover, they can potentially transmit economic shocks across countries. Consequently, exchange rate dynamics are of keen interest to investors and policymakers alike. In the first essay, common trends and common cycles among the exchange rates of Indonesia, Malaysia, Philippines, Singapore and Thailand are investigated in detail. We identify and isolate the permanent and transitory components of the nominal exchange rates of the currencies of Malaysia, Philippines, Singapore and Thailand in an effort to examine the similitude of their responses to within-country and across-country economic disturbances in the long-run as well as in the short-run. This also allows us to ascertain the relative impacts of permanent and transitory shocks on the behavior of the observed exchange rate series. We find that a large proportion of economic and financial shocks have a dual impact on the behavior of the exchange rates, i.e., while a proportion of the impact of certain shocks is transitory and fades away with time, there is a persistent proportion of these shocks that alters the long-run path of the exchange rates. Thus, most shocks cannot be considered as exclusively transitory or permanent. It is observed that in the case of pegged exchange rate regimes, the trend and cyclical components move in opposite directions and offset the impacts of one another. The small open economies of Norway and Sweden rely extensively on foreign trade. Outside the Scandinavian group of countries, Germany and the UK are two of their biggest trading partners within the European Union (EU), while the US is one of their largest non-EU trading partners. Real and monetary disturbances in one or more countries can easily be transmitted to other countries that are linked through channels of trade. Consequently, the assessment of the impact of foreign shocks on the domestic economy is central to the formulation of economic policy. In light of this, the second essay is dedicated to the investigation of the impact of real and monetary disturbances arising in the major trading partners of Norway and Sweden on their respective price levels and outputs. Such an assessment may provide useful insights into the nature of the transmission mechanism of economic disturbances across these countries and may prove to be useful in the formulation and conduct of monetary policy. The central banks of Norway and Sweden seek output stability while explicitly targeting pre-specified inflation rates in order to conduct monetary policy. The achievement of such quantitative targets relies considerably on the forecasts of the target variables themselves, and of the impact of the changes in the instrument variables that are adjusted to achieve the targets. Our results indicate that output shocks have a more significant impact than monetary shocks on the GDPs of both Norway and Sweden. While the GDPs of Norway and Sweden are predominantly influenced by output shocks originating in Norway and Sweden in the short-run, the output shocks originating in the larger economies of the UK and the US dominate the variation in the GDPs of Norway and Sweden in the long-run. We find that monetary shocks have a more significant impact than real shocks on the CPI variables of both Norway and Sweden. Specifically, the monetary shocks originating in Norway, Sweden and the UK are found to be more significant than those originating in the US. Crude oil constitutes a large proportion of exports for Canada and Norway. In fact, they are two of the largest net exporters of crude oil in the world. Therefore, oil price shocks may significantly impact the trade balance of these countries, thereby, prompting their monetary and fiscal authorities to intervene. The nature and the degree of the intervention would depend significantly on the assessment as to whether these shocks are permanent and/or transitory. Accordingly, the links among the trends and cycles in the price of crude oil, the real exchange rate of the Canadian Dollar and the real exchange rate of the Norwegian Krone are investigated in the third essay. We address this issue by ascertaining the presence of common trends and common cycles among the price of crude oil and the two real exchange rates, and then decomposing them into their trend and cyclical components in a multivariate modeling framework. We find that, while the real exchange rates of the Canadian Dollar and the Norwegian Krone vis-à-vis the US Dollar are trend-dominated, the West Texas Intermediate (WTI) crude oil price is neither trend-dominated nor cycle-dominated. We also find evidence for a positive relationship among the cyclical components of the WTI crude oil price and the two real exchange rates. As a robustness check, common trends and common cycles among the Brent crude oil price denominated in Euros, and the real exchange rates of the Canadian Dollar and the Norwegian Krone vis-à-vis the Euro are also examined. As in the previous case, we find evidence for the presence of common trends as well as common cycles. The positive co-movement among the cyclical components of the price of crude oil and the real exchange rates appears to be robust to changes in the numeraire currency. However, we observe a slight contrast in the co-movement among the trend components of the three variables when different numeraire currencies are used. The composition of the dissertation is as follows: The first chapter serves as an introduction to the dissertation and presents a broad picture of the analyses undertaken in this dissertation. Chapters two, three and four comprise essays one, two and three respectively. Chapter five concludes the dissertation.

Neste estudo foram analisados 40 países para o período mais longo disponível no IFS, através do teste de cointegração de Johansen (1995) e Vetores de Correção de Erro (VEC) para explorar as evidências sobre a capacidade de hedge dos ativos acionários com relação à inflação. Além disso, incluiu-se um teste de cointegração com quebra estrutural a fim de testar a relação entre as séries que não cointegraram através do teste principal de Johansen (1995). Cabe ressaltar que, ao contrário dos artigos que analisam as variáveis em diferença, ao considerarmos as variáveis em nível, um equilibrio de longo prazo entre estas foi encontrado, e mesmo que o retorno ao equilíbrio seja lento, ele existe e, após um periodo suficientemente longo, ambas as variáveis retornarão ao equilíbrio de longo prazo. Além disso, o equilíbrio de longo prazo encontrado para a maioria dos países decorreu do teste sem a inclusão de quebra estrutural. Assim, a relação de longo prazo entre as variáveis permanece estável para 29 países, indicando que choques reais ou monetários, mesmo permanentes, não são capazes de afetar a dinâmica entre estas variáveis. / This study analyses 40 countries for the longest sample available at IFS, through the cointegration test of Johansen (1995) and Vector Error Correction Models (VECM), in order to explore the evidences concerning the stock assets capability of hedging inflation. Besides, this paper includes a cointegration test with structural break in order to test the long run relationship between the series of countries that did not cointegrate using the Johansen (1995) test. We can’t stress enough that, contrary to the other studies that use variables in difference, when we consider them in level a long run relationship arrises, and even though the return to equilibrium is slow, it exists and after a sufficiently long period, both variables will reach a long run equilibrium. Beyond that, a long run relationship was found for most countries before considering the existance of a structural break. Hence, the long run relationship remains stable for 29 countries, indicating that any real or monetary shocks, even those permanent, did not affect the long run dinamic between stock prices and goods prices.

Fundação de Amparo à Pesquisa do Estado do Rio de Janeiro / Esta dissertação tem por objetivo analisar o comportamento da balança comercial no Brasil no período de 1999 a 2006 e buscar compreender os fatores que contribuíram positivamente para a evolução das exportações, compensando os efeitos negativos advindos do movimento de apreciação da taxa de câmbio ocorrido a partir de 2003. Para tanto, a partir da adaptação de um modelo de oferta e demanda das exportações, elaborado por Goldstein e Khan (1978), utiliza-se dois métodos de estimação para a obtenção das elasticidades com relação às variáveis explicativas do modelo. O primeiro método consiste na estimação de um modelo simultâneo de oferta e demanda das exportações e o segundo método consiste no modelo de cointegração proposto por Engle e Granger. Em ambos os casos, as exportações foram desagregadas por classes de produtos (manufaturados, semimanufaturados e básicos), além do total das exportações.Do lado da demanda, os resultados estimados em ambos os métodos de estimação, tanto para o longo como para o curto prazo, confirmam as hipóteses levantadas ao longo do estudo ou seja, o crescimento dos preços dos produtos exportados, assim como o crescimento da renda mundial, foram bastante relevantes para o crescimento das exportações em todas as classes de produtos analisadas. Em relação à oferta de exportação, a taxa de utilização da capacidade produtiva e os preços dos produtos exportados estiveram co-relacionados positivamente com o quantum ofertado, enquanto que a taxa de câmbio, ao contrário do esperado, apresentou elasticidades negativas. / The objective of this dissertation is to analyze the behavior of the trade balance in Brazil in the 1999-2006 period and to understand the factors that contributed positively for the evolution of the exports, compensating the negative effect of exchange rate appreciation. For in such a way, we adapt the model of supply and demand of exports, elaborated for Goldstein and Khan (1978), in order to use two estimation methods to calculate the elasticity of the independent variables of the model. The first method consists of the estimation of simultaneous model for exports supply and exports demand; the second method is the model of cointegration purposed by Engle and Granger. In both cases, the exports were disaggregated by product classes (manufacturing, semi-manufacturing and basics), besides total exports. From exports demand side, the estimated results in both methods, in the short and long run, confirmed the initial hypothesis that is, the growth of exports prices and the growth of world income were significant for the exports growth in all product classes. In the case of exports supply, the productive capacity and price of exports were positively correlated to the export quantum, while the exchange rate presented a negative elasticity.

Neste estudo foram analisados 40 países para o período mais longo disponível no IFS, através do teste de cointegração de Johansen (1995) e Vetores de Correção de Erro (VEC) para explorar as evidências sobre a capacidade de hedge dos ativos acionários com relação à inflação. Além disso, incluiu-se um teste de cointegração com quebra estrutural a fim de testar a relação entre as séries que não cointegraram através do teste principal de Johansen (1995). Cabe ressaltar que, ao contrário dos artigos que analisam as variáveis em diferença, ao considerarmos as variáveis em nível, um equilibrio de longo prazo entre estas foi encontrado, e mesmo que o retorno ao equilíbrio seja lento, ele existe e, após um periodo suficientemente longo, ambas as variáveis retornarão ao equilíbrio de longo prazo. Além disso, o equilíbrio de longo prazo encontrado para a maioria dos países decorreu do teste sem a inclusão de quebra estrutural. Assim, a relação de longo prazo entre as variáveis permanece estável para 29 países, indicando que choques reais ou monetários, mesmo permanentes, não são capazes de afetar a dinâmica entre estas variáveis. / This study analyses 40 countries for the longest sample available at IFS, through the cointegration test of Johansen (1995) and Vector Error Correction Models (VECM), in order to explore the evidences concerning the stock assets capability of hedging inflation. Besides, this paper includes a cointegration test with structural break in order to test the long run relationship between the series of countries that did not cointegrate using the Johansen (1995) test. We can’t stress enough that, contrary to the other studies that use variables in difference, when we consider them in level a long run relationship arrises, and even though the return to equilibrium is slow, it exists and after a sufficiently long period, both variables will reach a long run equilibrium. Beyond that, a long run relationship was found for most countries before considering the existance of a structural break. Hence, the long run relationship remains stable for 29 countries, indicating that any real or monetary shocks, even those permanent, did not affect the long run dinamic between stock prices and goods prices.

Fundação de Amparo à Pesquisa do Estado do Rio de Janeiro / Esta dissertação tem por objetivo analisar o comportamento da balança comercial no Brasil no período de 1999 a 2006 e buscar compreender os fatores que contribuíram positivamente para a evolução das exportações, compensando os efeitos negativos advindos do movimento de apreciação da taxa de câmbio ocorrido a partir de 2003. Para tanto, a partir da adaptação de um modelo de oferta e demanda das exportações, elaborado por Goldstein e Khan (1978), utiliza-se dois métodos de estimação para a obtenção das elasticidades com relação às variáveis explicativas do modelo. O primeiro método consiste na estimação de um modelo simultâneo de oferta e demanda das exportações e o segundo método consiste no modelo de cointegração proposto por Engle e Granger. Em ambos os casos, as exportações foram desagregadas por classes de produtos (manufaturados, semimanufaturados e básicos), além do total das exportações.Do lado da demanda, os resultados estimados em ambos os métodos de estimação, tanto para o longo como para o curto prazo, confirmam as hipóteses levantadas ao longo do estudo ou seja, o crescimento dos preços dos produtos exportados, assim como o crescimento da renda mundial, foram bastante relevantes para o crescimento das exportações em todas as classes de produtos analisadas. Em relação à oferta de exportação, a taxa de utilização da capacidade produtiva e os preços dos produtos exportados estiveram co-relacionados positivamente com o quantum ofertado, enquanto que a taxa de câmbio, ao contrário do esperado, apresentou elasticidades negativas. / The objective of this dissertation is to analyze the behavior of the trade balance in Brazil in the 1999-2006 period and to understand the factors that contributed positively for the evolution of the exports, compensating the negative effect of exchange rate appreciation. For in such a way, we adapt the model of supply and demand of exports, elaborated for Goldstein and Khan (1978), in order to use two estimation methods to calculate the elasticity of the independent variables of the model. The first method consists of the estimation of simultaneous model for exports supply and exports demand; the second method is the model of cointegration purposed by Engle and Granger. In both cases, the exports were disaggregated by product classes (manufacturing, semi-manufacturing and basics), besides total exports. From exports demand side, the estimated results in both methods, in the short and long run, confirmed the initial hypothesis that is, the growth of exports prices and the growth of world income were significant for the exports growth in all product classes. In the case of exports supply, the productive capacity and price of exports were positively correlated to the export quantum, while the exchange rate presented a negative elasticity.

Esse trabalho faz um estudo sobre a hipótese de descolamento das relações de curto e longo prazo entre os PIBs das economias brasileira e norte-americana. Para isso, é realizado, inicialmente, uma análise da literatura existente sobre a possível mudança nas relações entre as economias emergentes e avançadas. Em seguida, foram apresentadas explicações teóricas para as ligações entre os PIBs de Brasil e dos Estados Unidos da América. As metodologias usadas na investigação foram a análise de cointegração e a decomposição dos produtos internos brutos dos países em questão. Os principais resultados, obtidos usando dados anuais entre 1980 e 2008, apontam para uma mudança importante nas relações de longo prazo entre as economias a partir da década de 1980 e uma intensificação das relações de curto prazo a partir da década de 1990. No entanto, ao longo dos anos e, principalmente a partir da metade da década de 2000, foram encontradas evidências em favor de um maior descolamento de curto prazo dos PIBs de Brasil e EUA. / The following dissertation tests the hypothesis of decoupling between the Brazilian and North American economies. For this purpose, the related literature is initially investigated. Afterwards, theoretical explanations on the links between the GDPs of Brazil and USA are shown. The methodologies employed were cointegration analysis and trend/cycle decomposition of the GDPs of the mentioned countries. The main findings using annual data between 1980 and 2008 point out to an important change in the long term relationship between the economies starting in the 1980s and an increase in the short-run links during the 1990s. However, there is evidence suggesting a decoupling of the short term fluctuations between Brazils and USAs GDPs starting in the second half of the 2000s.

CoordenaÃÃo de AperfeÃoamento de Pessoal de NÃvel Superior / O valor total das exportaÃÃes anuais do Estado do Cearà cresceu em mÃdia 8,7% ao ano entre 1990 e 2012. Este estudo tem como objetivo estimar uma funÃÃo de exportaÃÃes para este estado. A metodologia economÃtrica empregada baseia-se na anÃlise de cointegraÃÃo proposta por Johansen (1988). Diferentes fatores condicionantes de funÃÃes teÃricas de oferta e demanda por exportaÃÃes foram considerados como variÃveis explicativas. Os resultados apresentados, em termos de sinais e magnitudes das elasticidades estimadas, sÃo consistentes tanto em relaÃÃo à teoria econÃmica quanto aos estudos empÃricos jà realizados para o Brasil. O modelo de correÃÃo de erros indicou que a taxa de cÃmbio possui pequena importÃncia para explicar a taxa de crescimento das exportaÃÃes no curto prazo. Na melhor aproximaÃÃo para a relaÃÃo de longo prazo, o vetor de cointegraÃÃo estimado sugere que renda externa à mais importante do que o cÃmbio para explicar o crescimento das exportaÃÃes. Estes resultados aparentam indicar que polÃticas pÃblicas para o setor exportador poderiam estar mais concentradas em melhorias no suprimento da demanda (investimentos no setor portuÃrio, por exemplo) e menos voltadas à polÃtica cambial de curto prazo. / The total value of annual exports of the Brazilian State of Cearà increased by an average 8.7% per year between 1990 and 2012. This study aims to estimate an export function for this state. The econometric methodology employed is based on the cointegration analysis proposed by Johansen (1988). Different conditioning factors of theoretical functions of supply and demand for exports were considered as explanatory variables. The results presented, in terms of signs and magnitudes of the estimated elasticities, are consistent both in terms of economic theory and empirical studies conducted in Brazil. The error correction model indicated that the exchange rate has little importance in explaining the growth rate of exports in the short term. In the best approximation to the long-term relationship, the estimated cointegration vector suggests that foreign income is more important than the exchange rate to explain the growth of exports. These results appear to indicate that public policies for the export sector could be more focused on improvements in meeting demand (investment in the port sector, for example) and less focused on short-term exchange rate policy.

Neste estudo foram analisados 40 países para o período mais longo disponível no IFS, através do teste de cointegração de Johansen (1995) e Vetores de Correção de Erro (VEC) para explorar as evidências sobre a capacidade de hedge dos ativos acionários com relação à inflação. Além disso, incluiu-se um teste de cointegração com quebra estrutural a fim de testar a relação entre as séries que não cointegraram através do teste principal de Johansen (1995). Cabe ressaltar que, ao contrário dos artigos que analisam as variáveis em diferença, ao considerarmos as variáveis em nível, um equilibrio de longo prazo entre estas foi encontrado, e mesmo que o retorno ao equilíbrio seja lento, ele existe e, após um periodo suficientemente longo, ambas as variáveis retornarão ao equilíbrio de longo prazo. Além disso, o equilíbrio de longo prazo encontrado para a maioria dos países decorreu do teste sem a inclusão de quebra estrutural. Assim, a relação de longo prazo entre as variáveis permanece estável para 29 países, indicando que choques reais ou monetários, mesmo permanentes, não são capazes de afetar a dinâmica entre estas variáveis. / This study analyses 40 countries for the longest sample available at IFS, through the cointegration test of Johansen (1995) and Vector Error Correction Models (VECM), in order to explore the evidences concerning the stock assets capability of hedging inflation. Besides, this paper includes a cointegration test with structural break in order to test the long run relationship between the series of countries that did not cointegrate using the Johansen (1995) test. We can’t stress enough that, contrary to the other studies that use variables in difference, when we consider them in level a long run relationship arrises, and even though the return to equilibrium is slow, it exists and after a sufficiently long period, both variables will reach a long run equilibrium. Beyond that, a long run relationship was found for most countries before considering the existance of a structural break. Hence, the long run relationship remains stable for 29 countries, indicating that any real or monetary shocks, even those permanent, did not affect the long run dinamic between stock prices and goods prices.

Master of Science / Department of Statistics / Shie-Shien Yang / Many nonstationary univariate time series can be made stationary by appropriate differencing before ARMA models are fitted to the differenced series. However, when it comes to nonstationary vector time series, the situation is more complex. Since the dynamic of a multivariate time series is multidimensional, even if we can make each component stationary by appropriate differencing, the vector process of the differenced components may be still nonstationary. However, it is possible that the projections of a nonstationary vector time series in some directions may result in a stationary process. Engle and Granger(1987) formally demonstrated that it is possible for some linear combinations of the components of nonstationary vector time series to be stationary. They called this phenomenon Co-Integration. This concept of cointegration turned out to be extremely important in the modeling and analysis of non-stationary time series in economics. Although economic variables individually may exhibit disequilibrium behaviors, often time, due to economic forces, these disequilibrium economic variables corporately form a dynamic equilibrium relationship. Specifically, certain linear combinations of nonstationary time series may appear to be stationary. Engle and Granger developed statistical method for detecting and estimating this equilibrium relationship. They also proposed the so called error correction model to model Co-Integrated vector time series. In this report, I give a detail review on the concept of cointegration, the 2-step estimation procedure for the error correction models, and the 7 types of tests for testing cointegration. Since the test statistics for testing cointegration do not follow any known distribution, critical values were obtained based on two models by Engle and Granger. Augmented Dickey-Fuller and Dickey-Fuller tests were recommended as it is believed that their distributions are independent of the under lying process model. The critical values table presented in their paper is widely used in testing cointegration. In this report, we'll construct tables of critical values based on different models and compare them with those obtained by Engle and Granger. Also, to demonstrate the practical usage of cointegration, applications to currency exchange rates and US stock and Asian stock indexes are presented as illustrative examples.

>Magister Scientiae - MSc / Purpose:This research investigates the existence of long-term equilibrium relationships among the stock market indices of Brazil, Russia, India, China and South Africa (BRICS). It further investigates cointegrated stock pairs for possible implementation of statistical arbitrage trading techniques.Design:We utilize standard multivariate time series analysis procedures to inspect unit roots to assess stationarity of the series. Thereafter, cointegration is tested by the Johansen and Juselius (1990) procedure and the variables are interpreted by a Vector Error Correction Model (VECM). Statistical arbitrage is investigated through the pairs trading technique.Findings:The five stock indices are found to be cointegrated. Analysis shows that the cointegration rank among the variables is significantly influenced by structural breaks. Two pairs of stock variables are also found to be cointegrated. This guaranteed the mean reversion property necessary for the successful execution of the pairs trading technique. Determining the optimal spread threshold also proved to be highly significant with respect to the success of this trading technique.Value:This research seeks to expand on the literature covering long-run co-movements of the volatile emerging market indices. Based on the cointegration relation shared by the BRICS, the research also seeks to encourage risk taking when investing. We achieve this by showing the potential rewards that can be realized through employing appropriate statistical arbitrage trading techniques in these markets.