Recent work on the U.S. concludes that one or more illusions are responsible for the empirically observed “flypaper effect.” Using annual Canadian data for the period 1962–84, we test the “single‐illusion” and “dual‐illusion” specifications currently in the literature. While the empirical results support the dual‐illusion specification, it is not the unambiguous choice over single‐illusion specifications as previously found. Further, the nature of the grant system in Canada raises questions about whether illusions or real factors produce the empirical results.
We examine the financial linkage between the London and Amsterdam financial markets using stock prices recorded in each market o¨er the period 1723᎐94 in conjunction with tests for common trends, cycles, and regime shifts. These tests re¨eal a surprising degree of integration between the markets as their prices mo¨e together in both the short and long run. Moreo¨er, shocks to the assets translate quickly and accurately between markets. It also appears that Dutch in¨estment did not destabilize London markets and stock prices in London were the primary Ž . determinant of prices in Amsterdam. JEL F32, G15, N23
The stationarity conditions for an autoregressive~AR! process in general are reduced to a remarkably simple inequality if the lag coefficients are restricted to be identical+ The condition is not only analytically elegant but also applicable in checking the validity of the stationarity conditions for such a restricted AR process of any order+ We are deeply indebted to Professor Paolo Paruolo, NP co-editor of Econometric Theory, and anonymous referees for constructive comments and suggestions that led to significant improvements+ Errors, if any, are solely
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