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...

In this paper we develop asymptotics for tests of equal predictive ability between nested models when factor-augmented regression models are used to forecast. We provide conditions under which the estimation of the factors does not affect the asymptotic distributions developed in Clark and...