We examine properties of the LM test of overdispersion when the alternative is characterized by arbitrary correlated random effects. We first derive a result that a natural test to detect such arbitrary correlated random effects would take the form of the test of conditional moment restriction,...

This paper studies nonstationarities in panels of exchange rates and interest rates. For this, we survey developments in the analysis of nonstationary panels with cross-sectional dependence modeled as a factor model. We focus on panel unit root tests and on inference on the nonstationary...