Computation of the Beveridge¯Nelson decomposition in the case of cointegrated systems with I(0) variables

This paper shows how the result of Ari?o and Newbold [Economics Letters, 61 (1998) 37] for the multivariate BN decomposition in the cointegrated case can be extended when I(0) variables are considered in the VEC model. An application of the extended procedure to the Spanish peseta/French franc real exchange rate is also provided.