When testing for cointegration, the asymptotic inference typically in use can be plagued by size distortion due to an inadequate first order approximation. Hence, for practical purposes the inference can be completely misleading and result in false conclusions regarding the presence of long-run...

This paper presents a likelihood-based panel test of cointegrating rank in heterogeneous panel models based on the mean of the individual rank trace statistics. The existence of the first two moments of the asymptotic distribution of the individual trace statistic is established. Based on this,...

The panel cointegration test of Larsson et al (1998) test for the maximum number of cointegrating relations in a dynamic panel given the assumption of a common cointegrating rank. This paper presents a test for this assumption. The test is based on the test statistic of Larsson et al (1998) and...

This paper presents a general likelihood-based framework for inference in panel-VAR models with cointegrating restrictions. The cointegrating relations are restricted to each cross-section while the rest of the model is unrestricted. The homogenous restriction of common cointegrating space is...

In this paper we apply a bivariate probit model to investigate the implications of bank lending policy. In the first equation we model the bank´s decision to grant a loan, in the second the probability of default. We confirm that banks provide loans in a way that is not consistent with default...

A bank that lends money to a household faces two types of risk. Most commonly mentioned is the risk of a default. Hardly ever referred to is the risk of an early redemption of the loan - leading to dormancy. We model consumer loans' transition from an active to a dormant state and estimate a...

We examine the sources of labor market fluctuations in the Scandinavian countries using VAR models with common trends. Our primary concerns are the sources of hysteresis in unemployment and possible differences between the economies. A simple economic model is presented to motivate our...

We study three necessary conditions for work sharing to increase employment. First, there must exist a negative long-run relation between working time and employment. Second, hours per worker must be exogenous with respect to wages and employment. Third, policy makers must be able to influence...

In this paper we propose an alternative method for investigating the sources behind the behavior of real wages and unemployment. The statistical model we study is a certain structural error correction model, a so called common trends model, which has become popular in the empirical...