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This paper empirically analyses the stability of the aggregate import demand function for G7 countries. The standard cointegration test and a test developed by Gregory and Hansen are performed. The results of standard cointegration tests suggest that there is no stable cointegrating relation between real import, real GDP and relative import price for all G7 countries. The cointegrating relation is empirically supported for France and Germany if structural change for cointegrating vector is explicitly taken into consideration. The cointegrating relation is empirically rejected for Canada, Italy, Japan, the UK and the USA. Thus, the stimulation of domestic business conditions will not necessarily link the quantity of imports for these five countries. [ABSTRACT FROM AUTHOR]

This paper has tested a variant of purchasing power parity to determine if exchange rate adjusted price levels between the United States and Japan, the United Kingdom and Canada form a cointegrated system. Tests for cointegration were performed over a time period that spanned both fixed and flexible exchange rates, and for fixed and flexible rate subperiods.
Evidence favorable to PPP is marginal with a number of test statistics bordering on significance at the 0.10 level. What evidence there is comes primarily from the wholesale price index, thus supporting the arbitrage view of PPP over the alternative which stresses the overall purchasing power of money. Comparing periods, the strongest support for cointegration comes from the fixed rate subperiod, when the Japanese and possibly the Canadian WPIs form cointegrated systems with the US WPI. With the possible exception of Canada (WPI), cointegration is rejected for the recent period of flexible exchange rates. [ABSTRACT FROM AUTHOR]

This study empirically examines the sources of fluctuations in hours worked in Canada, Germany, Japan and the U.S. It is particularly motivated by Galí's (1999) VAR study, which demonstrates that a positive technology shock reduces hours worked, at least in the short run. However, in the present study, a technology shock is identified without recourse to Galí's long-run restriction, which has been subject to active controversy. Furthermore, this study uncovers other important sources of fluctuations in hours worked to reflect the concern, raised by numerous studies, that technology shocks leave most variations in hours worked unexplained. Specifically, there are six shocks underlying our model, and they are identified using a set of sign restrictions. The empirical results confirm that in all four countries, a positive technology shock significantly reduces hours worked. This technology shock, along with labor supply and demand shocks, accounts for most of the short-term variations in hours worked. As the forecasting horizon increases, technology and demand shocks become less important, whereas labor supply shocks contribute to explaining the bulk of long-run variations in hours worked. Finally, the empirical relevance of Galí's longrun identification restriction is tested and the results are related to those obtained using the sign restriction model. [ABSTRACT FROM AUTHOR]

A new method is developed for detecting regime switches between cointegration and no-cointegration at unknown times allowing for switching lag structure. In this method, time-series observations are divided into several segments, and a regression model with or without cointegration is fitted to each segment. The goodness of fit of the global model composed of these local models is evaluated using the corresponding modified information criterion, and the division which minimizes this criterion defines the best model. Simulation results suggest that the proposed method works well. Empirical results indicate that money demand is well described by the proposed method in Canada, UK and Japan. [ABSTRACT FROM AUTHOR]

Disaggregated trade data are used to examine changing trade patterns for five developed economic regions: the USA, the European Union, Australia, Canada and Japan. This study covers the 1980-1997 time period, during which international trade for most goods faced less border protection. Changing trade patterns are found for the USA, Japan, and the EU, while persistent trade patterns are observed for Australia and Canada. Classifying goods into four groups, trade patterns found in manufactured goods were the most dynamic, and trade in bulk agricultural goods the most persistent. [ABSTRACT FROM AUTHOR]