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Cointegration Vector Estimation by Panel DOLS and LongRun Money Demand
 Oxford Bulletin of Economics and Statistics
, 2003
"... We study the panel dynamic ordinary least square (DOLS) estimator of a homogeneous cointegration vector for a balanced panel of N individuals observed over T time periods. Allowable heterogeneity across individuals include individualspecific time trends, individualspecific fixed effects and times ..."
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Cited by 92 (0 self)
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We study the panel dynamic ordinary least square (DOLS) estimator of a homogeneous cointegration vector for a balanced panel of N individuals observed over T time periods. Allowable heterogeneity across individuals include individualspecific time trends, individualspecific fixed effects and timespecific effects. The estimator is fully parametric, computationally convenient, and more precise than the single equation estimator. For fixed N as T fi 1, the estimator converges to a function of Brownian motions and the Wald statistic for testing a set of s linear constraints has a limiting v2(s) distribution. The estimator also has a Gaussian sequential limit distribution that is obtained first by letting T fi 1 and then letting N fi 1. In a series of MonteCarlo experiments, we find that the asymptotic distribution theory provides a reasonably close approximation to the exact finite sample distribution. We use panel DOLS to estimate coefficients of the longrun money demand function from a panel of 19 countries with annual observations that span from 1957 to 1996. The estimated income elasticity is 1.08 (asymptotic s.e. 0.26) and the estimated interest rate semielasticity is)0.02 (asymptotic s.e. 0.01). *This paper was previously circulated under the title ‘A Computationally Simple Cointegration
International R&D spillovers: An application of estimation and inference in panel cointegration
 Oxford Bulletin of Economics and Statistics
, 1999
"... In this paper, we consider the application of recent results on the estimation and inference in panel cointegration to the study of empirical economic growth. The emergence of endogenous growth theory in the 1980s has led to a resurgence of interest in the sources of economic growth. Coe and ..."
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Cited by 87 (0 self)
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In this paper, we consider the application of recent results on the estimation and inference in panel cointegration to the study of empirical economic growth. The emergence of endogenous growth theory in the 1980s has led to a resurgence of interest in the sources of economic growth. Coe and
Nonstationary panel data analysis: an overview of some recent developments
, 2001
"... This paper overviews some recent developments in panel data asymptotics, concentrating on the nonstationary panel case and gives a new result for models with individual effects. Underlying recent theory are asymptotics for multiindexed processes in which both indexes may pass to infinity. We review ..."
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Cited by 56 (0 self)
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This paper overviews some recent developments in panel data asymptotics, concentrating on the nonstationary panel case and gives a new result for models with individual effects. Underlying recent theory are asymptotics for multiindexed processes in which both indexes may pass to infinity. We review some of the new limit theory that has been developed, show how it can be applied and give a new interpretation of individual effects in nonstationary panel data. Fundamental to the interpretation of much of the asymptotics is the concept of a panel regression coefficient which measures the long run average relation across a section of the panel. This concept is analogous to the statistical interpretation of the coefficient in a classical regression relation. A variety of nonstationary panel data models are discussed and the paper reviews the asymptotic properties of estimators in these various models. Some recent developments in panel unit root tests and stationary dynamic panel regression models are also reviewed.
Unit Roots and Cointegration in Panels
, 2007
"... This paper provides a review of the literature on unit roots and cointegration in panels where the time dimension (T), and the cross section dimension (N) are relatively large. It distinguishes between the first generation tests developed on the assumption of the cross section independence, and the ..."
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Cited by 54 (3 self)
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This paper provides a review of the literature on unit roots and cointegration in panels where the time dimension (T), and the cross section dimension (N) are relatively large. It distinguishes between the first generation tests developed on the assumption of the cross section independence, and the second generation tests that allow, in a variety of forms and degrees, the dependence that might prevail across the different units in the panel. In the analysis of cointegration the hypothesis testing and estimation problems are further complicated by the possibility of cross section cointegration which could arise if the unit roots in the different cross section units are due to common random walk components.
The Transfer Problem Revisited: Net Foreign Assets and Real Exchange Rates
 The Review of Economics and Statistics
, 2004
"... What are the implications for the real exchange rate of the need for debtor countries to run trade surpluses in the long run so as to service their external liabilities? Using a newly assembled data set on the net external position of industrial and developing countries (Lane and MilesiFerretti (19 ..."
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Cited by 50 (6 self)
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What are the implications for the real exchange rate of the need for debtor countries to run trade surpluses in the long run so as to service their external liabilities? Using a newly assembled data set on the net external position of industrial and developing countries (Lane and MilesiFerretti (1999a) the paper revisits this longstanding issue in international economics (the transfer problem). It presents a simple theoretical framework that leads to empirically testable implications on the longrun comovements of real exchange rates, net foreign assets, relative GDP and terms of trade, and crosscountry and timeseries evidence on the subject. It is shown that on average countries with net external liabilities have more depreciated real exchange rates. The main channel of transmission seems to work through the relative price of nontraded goods, rather than through the relative price of traded goods across countries. JEL Classification: F21, F31, F41.
How reliable is pooled analysis in political economy? The globalizationwelfare state nexus revisited
 European Journal of Political Research
, 2005
"... Panel data analysis has become very popular in comparative political economy. However, in order to draw meaningful inferences from such data, one has to address specification and estimation issues carefully. This paper aims to demonstrate various pitfalls that typically occur in applied empirical ..."
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Cited by 43 (1 self)
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Panel data analysis has become very popular in comparative political economy. However, in order to draw meaningful inferences from such data, one has to address specification and estimation issues carefully. This paper aims to demonstrate various pitfalls that typically occur in applied empirical work. To illustrate this, we refer to the debate on the globalizationwelfare state nexus. We reexamine a model by Garrett and Mitchell (2001), a leading study in this regard. Utilizing a data set of 17 OECD countries and the time period 1961 to 1993, they find evidence that globalization and partisan composition have a significant impact on the extent of public activity. However, because they apply a dynamic specification in levels, they do not adequately take into account both the dynamic and spherical nature of the data. In contrast, we propose an autoregressive model in first differences that is shown to perform well in statistical terms. Further, we explicitly pay attention to the time pattern of the globalizationwelfare state nexus. Substantively, we find evidence that government spending is primarily driven by the state of the domestic economy. Neither partisan effects nor the international economic environment have affected public expenditure considerably.
Exchange Rate Misalignments and Economic Performance. Central Bank of Chile Working Paper 315
 Are Currency Crises Predictable? A Test. IMF Staff Papers 46(2), 107138 Bleany, M., Greenaway, D., 2001. The Impact of Terms of Trade and Real Exchange Rate Volatility on Investment and Growth in SubSaharan Africa. Journal of Development Economics 65(2
"... La serie de Documentos de Trabajo en versión PDF puede obtenerse gratis en la dirección electrónica: ..."
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Cited by 42 (0 self)
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La serie de Documentos de Trabajo en versión PDF puede obtenerse gratis en la dirección electrónica:
Dynamic Seemingly Unrelated Cointegrating Regression
, 2003
"... Multiple cointegrating regressions are frequently encountered in empirical work as, for example, in the analysis of panel data. When the equilibrium errors are correlated across equations, the seemingly unrelated regression estimation strategy can be applied to cointegrating regressions to obtain as ..."
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Cited by 42 (3 self)
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Multiple cointegrating regressions are frequently encountered in empirical work as, for example, in the analysis of panel data. When the equilibrium errors are correlated across equations, the seemingly unrelated regression estimation strategy can be applied to cointegrating regressions to obtain asymptotically efficient estimators. While nonparametric methods for seemingly unrelated cointegrating regressions have been proposed in the literature, in practice, speciÞcation of the estimation problem is not always straightforward. We propose Dynamic Seemingly Unrelated Regression (DSUR) estimators which can be made fully parametric and are computationally straightforward to use. We study the asymptotic and small sample properties of the DSUR estimators both for heterogeneous and homogenous cointegrating vectors. The estimation techniques are then applied to analyze two longstanding problems in international economics. Our Þrst application revisits the issue of whether the forward exchange rate is an unbiased predictor of the future spot rate. Our second application revisits the problem of estimating longrun correlations between national investment and national saving.
The Social Rate of Return on Infrastructure Investment
 World Bank Policy Research Working Paper
"... We estimate social rates of return to electricity generating capacity and paved roads by looking at their effect on aggregate output and comparing this to their costs of construction. Our results are driven by our finding that both types of infrastructure are highly complementary with physical and h ..."
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Cited by 40 (0 self)
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We estimate social rates of return to electricity generating capacity and paved roads by looking at their effect on aggregate output and comparing this to their costs of construction. Our results are driven by our finding that both types of infrastructure are highly complementary with physical and human capital, but have rapidly diminishing returns if increased in isolation. This produces an optimal mix of capital inputs and makes it very easy for a country to have too much, or too little, infrastructure. For policy purposes, we compare the rate of return to investing in infrastructure with our estimated rate of return to capital as a whole. The strong complementarity we find between physical and human capital, and lower prices of investment goods in developed countries, means that we calculate that rich countries have rates of return to capital just as high as those in the poorest countries, though the highest rates of return to capital are found in the class of middle income (per capita) countries. We find that the rates of return to both electricity generating capacity and paved roads are on a par with, or lower than, that on other forms of capital in most countries. However, in a limited number of countries we find evidence of very acute shortages of
2004), “The Euro Effect on Trade is not as Large as Commonly Thought”, mimeo
"... Existing studies on the impact of the euro on goods trade report increments between 5 % and 40%. These estimates are based on standard panel gravity models for the level of trade. We show that the residuals from these models exhibit upwards trends over time for the euro countries, and that this lead ..."
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Cited by 37 (4 self)
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Existing studies on the impact of the euro on goods trade report increments between 5 % and 40%. These estimates are based on standard panel gravity models for the level of trade. We show that the residuals from these models exhibit upwards trends over time for the euro countries, and that this leads to an upward bias in the estimated euro effect. To correct for that, we extend the standard model by including a time trend that may have different effects across countrypairs. This results in an estimated euro impact of only 3%.