Issues in International Macroeconomics And Finance: A Time-Series Analysis
This thesis consists of two main parts. The first part is composed of two essays. The first essay addresses the common movements of employment growth within and across 12 countries in the European Monetary Union after the formation of the currency union. A Bayesian dynamic factor model is used to analyse fluctuations in European employment cycles and the co-movement of sectoral employment growth across industries and countries, so as to derive the sources of these fluctuations. The findings suggest that these co-movements did not tend to increase after the introduction of the euro. The results for sectoral employment growth indicate that the idiosyncratic factor accounts for a large share of the fluctuations in employment growth. For the variance that is not due to the idiosyncratic factor, the common-European factor accounts for the largest share of these fluctuations. The second essay uses a vector autoregressive model to estimate the effects of each country's country-specific mark-up and technology shocks. The model separately identifies each country's mark-up and technology shocks by imposing restrictions on the sign of each country's impulse responses. The study finds that these shocks are equally important, quantitatively, for explaining the fluctuations in the relevant macroeconomic variables. The second part presents the final essay, which examines applications of a recently developed fractionally cointegrated vector autoregressive model to commodity spot and futures prices. This essay, co-authored with Morten Ørregaard Nielsen, Paresh K. Narayan, and Ke Xu, models and forecasts commodity spot and futures prices using FCVAR models to accommodate fractional integration. The findings illustrate that, on average, the fractional model generates higher profits compares to non-fractional cointegrated VAR model, especially when analysing futures markets.