The paper analyses the consequences of structural change in the presenceof non-stationary stochastic processes I(1) or I(2). The structural change mayconcern the deterministic structure (in particular, the trend and the constantterm) as well as the process generating the stochastic part. The focus of thepaper is on the case of a discrete change in a regime for which the momentof switch is known. A change in the deterministic part does not alter thecharacter of the cointegration relationships but its consequences for cotrendingand cobreaking are interesting. The consequences of a change in the stochasticpart are more complex, because then the stochastic process as well as thedeterministic structure of the VECM are modified. The restrictions are analysedfor both cases.

We study the evolution of income and wealth inequality in an economy undergoing endogenous structural change with imperfect labor mobility. Our economy features two sectors: services and manufacturing. With faster TFP growth in manufacturing, labor reallocates from manufacturing to services. This reallocation is slower due to labor mobility frictions, which in turn, raises relative wages in services. As a result, income inequality is higher. Moreover, we study the impact of structural change on wealth inequality. Its economic intuition is more ambiguous. On the one hand, increased income dispersion implies increased dispersion in the ability to accumulate wealth across individuals. On the other hand, younger workers who hold the least assets are the most mobile across sectors. Their incomes are improved, which boosts their savings, which works towards equalizing wealth distribution. The consequence of these changes can only be verified with a computational model. To this end, we construct an overlapping generations model with two sectors: manufacturing and services. Our model also features heterogeneous individuals. With our model, we are able to show how the structural change affected the evolution of income and wealth inequality in Poland as of 1990.

In this study, we model realized volatility constructed from intra-day high-frequency data. We explore the possibility of confusing long memory andstructural breaks in the realized volatility of the following spot exchange rates: EUR/USD, EUR/JPY, EUR/CHF, EUR/GBP, and EUR/AUD. The resultsshow evidence for the presence of long memory in the exchange rates’ realizedvolatility. From the Bai–Perron test, we found structural breakpoints that matchsignificant events in financial markets. Furthermore, the findings provide strongevidence in favour of the presence of long memory.