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Empirics for Economic Growth and Convergence
 European Economic Review, Vol
, 1996
"... important in reshaping this article. X. SalaiMartin has generously donated insight and time to try and make me understand. He need not, however, agree with all my statements below. All calculations were performed using the econometrics shell tsrf. Nontechnical Summary The convergence hypothesist ..."
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Cited by 197 (4 self)
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important in reshaping this article. X. SalaiMartin has generously donated insight and time to try and make me understand. He need not, however, agree with all my statements below. All calculations were performed using the econometrics shell tsrf. Nontechnical Summary The convergence hypothesisthat poor economies might \catch up" has generated a huge empirical literature: this paper critically reviews some of the earlier key ndings, clari es their implications, and relates them to more recent results. Particular attention is devoted to interpreting convergence empirics. The paper argues that relating them to growth theories, as usually done, gives but one interpretation to convergence dynamics; it does not exhaust their importance. Instead, if we relate convergence to the dynamics of income distributions, it broadens the issues on which such empirics can shed light; it connects with policy concerns on persistent or growing inequality, regional coreperiphery stagnation, and tendencies for ongoing capital ows across developed and developing countries. The main ndings are: (1) The muchheralded uniform 2 % rate of convergence could arise for reasons unrelated to the dynamics of economic growth. (2) Usual empirical analysescrosssection (conditional) convergence regressions, time series modelling, panel data analysiscan be misleading for understanding convergence; a model of polarization in economic growth clari es those di culties. (3) The data, more revealingly modelled, show persistence and immobility across countries: some evidence supports Baumol's idea of \convergence clubs"; some evidence shows the poor getting poorer, and the rich richer, with the middle class vanishing. (4) Convergence, unambiguous up to sampling error, is observed across US states. Empirics for Economic Growth and Convergence by
On the Estimation and Inference of a Cointegrated Regression in Panel Data
 CENTRE FOR POLICY RESEARCH, SYRACUSE UNIVERSITY
, 1999
"... In this paper, we study the asymptotic distributions for leastsquares (OLS), fully modi ed (FM), and dynamic OLS (DOLS) estimators in cointegrated regression models in panel data. We show that the OLS, FM, and DOLS estimators are all asymptotically normally distributed. However, the asymptotic dist ..."
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Cited by 129 (5 self)
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In this paper, we study the asymptotic distributions for leastsquares (OLS), fully modi ed (FM), and dynamic OLS (DOLS) estimators in cointegrated regression models in panel data. We show that the OLS, FM, and DOLS estimators are all asymptotically normally distributed. However, the asymptotic distribution of the OLS estimator is shown to have a nonzero mean. Monte Carlo results examine the sampling behavior of the proposed estimators and show that (1) the OLS estimator has a nonnegligible bias in nite samples, (2) the FM estimator does not improve over the OLS estimator in general, and (3) the DOLS outperforms both the OLS and FM estimators.
The LongRun Relationship between House
 Prices and Rents,Finance and Economics Discussion
, 2004
"... The proposition that \housing prices can't continue to outpace growth in household income " (Wall Street Journal; July 25, 2002) is the received wisdom among many housingmarket observers. More formally, many in the housing literature argue that house prices and income are cointegrated. I ..."
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Cited by 106 (3 self)
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The proposition that \housing prices can't continue to outpace growth in household income " (Wall Street Journal; July 25, 2002) is the received wisdom among many housingmarket observers. More formally, many in the housing literature argue that house prices and income are cointegrated. In this paper, I show that the data do not support this view. Standard tests using 27 years of nationallevel data do not nd evidence of cointegration. However, it is known that tests for cointegration have low power, especially in small samples. I use paneldata tests for cointegration that have been shown to be more powerful than their standard timeseries counterparts to test for cointegration in a panel of 95 metro areas over 23 years. Using a bootstrap approach to allow for crosscorrelations in citylevel houseprice shocks, I show that even these more powerful tests do not reject the hypothesis of no cointegration. Thus the errorcorrection speci cation for house prices and income commonly found in the literature may be inappropriate.
Panel stationarity test with structural breaks
, 2005
"... In this paper, we extend the heterogeneous panel data stationarity test of Hadri (2000) to the cases where breaks are taken into account. Four models with different patterns of breaks under the null hypothesis are specified. The moments of the statistics corresponding to the four models are derived ..."
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Cited by 11 (3 self)
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In this paper, we extend the heterogeneous panel data stationarity test of Hadri (2000) to the cases where breaks are taken into account. Four models with different patterns of breaks under the null hypothesis are specified. The moments of the statistics corresponding to the four models are derived in closed form via characteristic functions. We also provide the exact moments of a modified statistic that does not asymptotically depend on the location of the break point under the null hypothesis. The cases where the break point is unknown are also considered. For the model with breaks in the level and no time trend and for the model with breaks in the level and in the time trend, we can allow for the number of breaks and their positions to differ across individuals for cases with known, unknown breaks and the modified statistic. The asymptotic distributions of all the statistics proposed are derived under the null hypothesis and are shown to be normally distributed. Finally, we show by simulations that our suggested tests have good performance in finite samples.
Growth Convergence and Spillovers among Indian States: What Matters? What Does Not?
, 2010
"... This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to eli ..."
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Cited by 2 (0 self)
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This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Convergence and spillovers across countries and within countries are old, but recurrent policy concerns, and India is no exception to this rule. This paper examines convergence and spillovers across Indian states using nonstationary panel data techniques. Results on convergence among Indian states are generally found to be similar, but more nuanced, than previous studies. Generally speaking, there is evidence of divergence over the entire sample period, convergence during subperiods corresponding to structural breaks, and club convergence. There is strong evidence of club convergence among the high and lowincome states; the evidence for middleincome states is mixed. Dynamic spillover effects among
Key Words and Phrases: LBUI test; LM test.
"... This paper proposes a residualbased Lagrange Multiplier (LM) test for the null of cointegration in panel data. The test is analogous to the locally best unbiased invariant (LBUI) for a moving average (MA) unit root. The asymptotic distribution of the test is derived under the null. Monte Carlo simu ..."
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This paper proposes a residualbased Lagrange Multiplier (LM) test for the null of cointegration in panel data. The test is analogous to the locally best unbiased invariant (LBUI) for a moving average (MA) unit root. The asymptotic distribution of the test is derived under the null. Monte Carlo simulations are performed to study the size and power properties of the proposed test. Overall, the empirical sizes of the LMFM and LMDOLS are close to the true size even in small samples. The power is quite good for the panels where T 50, and decent with panels for fewer observations in T. In our xed sample of N =50and T =50,the presence of a moving average and correlation between the regressor errors and regressors causes the two tests to perform quite di erently, complicating the choice of estimation procedures. In general, the LMDOLS test seems to be better at correcting these e ects, although in some cases the LMFM test is more powerful. Although much of the nonstationary time series econometrics has been criticized for having more to do with the speci c properties of the data set rather than underlying economic models, the recent development of 1 the cointegration literature has allowed for a concrete bridge between economic long run theory and time series methods. Our test now allows for the testing of the null of cointegration in a panel setting and should be of considerable interest to economists in a wide variety of elds. 1
On the longrun determinants of real exchange rates for developing countries: Evidence from Africa, Latin America and Asia
, 2003
"... The main goal of this paper is to tackle the empirical issues of the real exchange rate litterature by applying recently developed panel cointegration techniques to a structural longrun real exchange rate equation. We consider here a sample of 45 developing countries, divided into three groups acco ..."
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The main goal of this paper is to tackle the empirical issues of the real exchange rate litterature by applying recently developed panel cointegration techniques to a structural longrun real exchange rate equation. We consider here a sample of 45 developing countries, divided into three groups according to geographical criteria: Africa, Latin America and Asia. Our investigations con…rm that having a reference to assess the degree of distortion of real exchange rate is not as simple as it can be thought with the PPP concept. The real exchange rate is e¤ectively at the centre of an economic spiral and its value depends on the economic speci…cities of each country. In other words, we don’t have a …xed and general norm but, for each economy, the real exchange rate trajectory depends on its development level, on the way economic policy is conducted, and on its position on the international market.
rates for developing countries: Evidence from Africa, Latin America and Asia
, 2003
"... The main goal of this paper is to tackle the empirical issues of the real exchange rate litterature by applying recently developed panel cointegration techniques to a structural longrun real exchange rate equation. We consider here a sample of 45 developing countries, divided into three groups acco ..."
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The main goal of this paper is to tackle the empirical issues of the real exchange rate litterature by applying recently developed panel cointegration techniques to a structural longrun real exchange rate equation. We consider here a sample of 45 developing countries, divided into three groups according to geographical criteria: Africa, Latin America and Asia. Our investigations confirm that having a reference to assess the degree of distortion of real exchange rate is not as simple as it can be thought with the PPP concept. The real exchange rate is effectively at the centre of an economic spiral and its value depends on the economic specificities of each country. In other words, we don’t have a fixed and general norm but, for each economy, the real exchange rate trajectory depends on its development level, on the way economic policy is conducted, and on its position on the international market.
Testing the Unit Root Hypothesis in a Nonlinear Dynamic Panel where the Time Dimension is Fixed
, 2006
"... This paper derives a unit root test in a nonlinear panel that accommodates a gradual structural change in the deterministics and in the dynamics. The analysis is concentrated on the case where the time dimension is …xed and the crosssection dimension tends to in…nity. Our test statistic, adjusted f ..."
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This paper derives a unit root test in a nonlinear panel that accommodates a gradual structural change in the deterministics and in the dynamics. The analysis is concentrated on the case where the time dimension is …xed and the crosssection dimension tends to in…nity. Our test statistic, adjusted for …nitesample bias, has an asymptotic normal distribution whose …rst two moments are calculated analytically. Finite sample properties of the test are examined, and we highlight cases under which the panel unit root tests by Harris and Tzavalis (1999) have inferior or reasonable power compared to our test.