Credit Market Disequilibrium in Poland: Can We Find What We Expect? Non-Stationarity and the 'Min' Condition

29 Pages Posted: 20 Aug 2003

See all articles by Christophe Hurlin

Christophe Hurlin

University of Orleans

Rafaƚ Kierzenkowski

Université Paris IX Dauphine

Date Written: June 2003

Abstract

This paper presents an empirical investigation of the disequilibrium hypothesis on the Polish loan market in the 1990s. Using data over this period of deep transition, we estimate a disequilibrium model with a standard maximum likelihood method. However, the estimates are highly counter-intuitive as regards the timing of the identified regimes. We show that the gap between the econometric evidence and the expected results may stem from the issue of stochastic non-stationarity in a disequilibrium setting based on the "min" condition. We find that the omission of one non-stationary variable of the cointegrating space or the absence of a "structural" cointegrating relationship in one or both regimes lead to a spurious configuration. In such a case, using, wrongly, the standard likelihood function, derived under the hypothesis of stationarity, may lead to non-convergent estimates of structural parameters and, as a consequence, to a fallacious regimes identification. Therefore, as the first approach to this issue, we estimate a disequilibrium model with stationary data. The empirical results are then robust and economically founded and correspond to the set and the timing of anticipated regimes.

Keywords: disequilibrium, monetary standard and regimes, non-stationarity and cointegration, transition, Poland

JEL Classification: D50, E42, C32, P00

Suggested Citation

Hurlin, Christophe and Kierzenkowski, Rafaƚ, Credit Market Disequilibrium in Poland: Can We Find What We Expect? Non-Stationarity and the 'Min' Condition (June 2003). Available at SSRN: https://ssrn.com/abstract=420565 or http://dx.doi.org/10.2139/ssrn.420565

Christophe Hurlin (Contact Author)

University of Orleans ( email )

Université d'Orléans
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France

Rafaƚ Kierzenkowski

Université Paris IX Dauphine ( email )

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