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Title:Long memory in Angolan macroeconomic series: mean reversion versus explosive behaviour
Authors:Barros, Carlos P.ISNI
Caporale, Guglielmo Maria
Gil-Alana, Luis A.
Periodical:African Development Review (ISSN 1467-8268)
Geographic term:Angola
Subjects:economic models
exchange rates
Abstract:Angola being a major oil producer, it is of interest to investigate the impact of economic and policy shocks on its macroeconomic variables. Some evidence is provided in this paper, which focuses on inflation, money aggregates and exchange rates. The study examines the time series behaviour of several Angolan macroeconomic variables, using monthly data from August 1996 to June 2011. The series are the inflation rate, M1, M2, the exchange rate at the beginning and the end of the period, and the monthly average exchange rate. In the first stage univariate fractional integration models are estimated in order to determine whether shocks to the variables have transitory or permanent effects. In the second stage fractional cointegration techniques are applied to test for the existence of long-run equilibrium relationships between the variables of interest. The results suggest a high degree of persistence in the individual series (that are not mean-reverting) and the existence of bivariate long-run cointegrating relationships between prices and money, and prices and nominal exchange rates. Bibliogr., notes, sum. [Journal abstract, edited]