In this paper we show the consequences of applying a panel unit root test when testing for a purchasing power parity relationship. The distribution of the tests investigated, including the IPS test of Im et al (1997), are influenced by a common stochastic trend which is usually not accounted...

The three-step generalized methods of moments (GMM) approach of Kapoor, Kelejian and Prucha (2007), which corrects for spatially correlated errors in static panel data models, is extended by introducing fixed effects, a spatial lag, and a one-period lag of the dependent variable as additional...

We extend the three-step generalized methods of moments (GMM) approach of Kapoor, Kelejian, and Prucha (2007), which corrects for spatially correlated errors in static panel data models, by introducing a spatial lag and a one-period lag of the dependent variable as additional explanatory...

Empirical studies on aggregate export behavior have recently emphasized the role played by innovation as the main force driving product differentiation and competitiveness for developed countries. These studies treat foreign innovation as a variable that affects negatively national export...

The asymptotic local powers of various panel unit root tests are investigated. The power envelope is obtained under homogeneous and heterogeneous alternatives. It is compared with asymptotic power functions of the pooled t-test, the Ploberger-Phillips (2002) test, and a point optimal test in...

This paper investigates a generalized method of moments (GMM) approach to the estimation of autoregressive roots near unity with panel data and incidental deterministic trends. Such models arise in empirical econometric studies of firm size and in dynamic panel data modeling with weak...

We study the effect of economic openness on domestic prices by linking the quantity theory of money (QTM) with purchasing power parity (PPP). Our model pertains to long run domestic price movements, and shows that economic openness has a negative relation with QTM and a positive relation with...

Long histories of returns are needed but often lacking when estimating the equity premium. This paper studies stock return predictability from the perspective of a Bayesian investor who has access to international data. Learning across countries arises whenever this investor believes that...

We consider large n, T panel data models with fixed effects, persistent common factors allowing for cross-section dependence, and possibly correlated persistent innovations that are assumed fractionally integrated. In the model, a) persistence in the innovations and the common factor allows for...

The Australian federal election cycle, which occurs every 3 years, causes much media attention and invokes much consternation regarding investment decisions in both the real economy and financial markets. This paper constructs measures of political uncertainty and formally explores their...