Abstract
Using long-range dependence techniques we examine the order of integration of Angola’s macro variables from a fractional viewpoint. Based on a small open economy model, the series examined are money reserves, credit, money supply, lending rate, exchange rates, CPI, GDP, oil revenues and government expenditure, for the period of January 2000 to December 2013. The results suggest that the variables are nonstationary with orders of integration equal to or higher than 1 suggesting nonmean-reverting behaviour. Structural breaks reveal that the series reflect the IMF intervention in Angola in 2003 to control inflation. Policy implications are derived.
Acknowledgement
Comments from the editor and two anonymous referees are gratefully acknowledged.
Notes
1 For the purpose of the present work, we define an I(0) process as a covariance stationary process with spectral density that is positive and finite at the zero frequency.
2 Seasonal dummy variables were found to be statistically insignificant in all cases and higher seasonal AR orders lead to the same results as those presented in .