Panel LM unit root tests with level and trend shifts

This paper considers a Lagrange multiplier (LM) based panel unit root test that allows for heterogeneous structural breaks in both the intercepts and slopes of a series. We note that many popular time series variables are likely to exhibit changing means and/or trends over time. Given that the usual tests will depend on the nuisance parameters indicating the locations of the trend breaks, we adopt a transformation procedure that makes our new panel unit root tests invariant to the nuisance parameters. To illustrate the importance of the power gain provided by our test, we examine the convergence hypothesis using relative ratios of per capita health care expenditures in 20 OECD countries. Our results provide evidence that the convergence hypothesis is supported.     

Unit root and trend breaks in per capita output: evidence from sub-Saharan African countries

This article examines the nonstationary properties of per capita real output in 28 sub-Saharan African (SSA) countries, covering the period 1960–2014. The sequential testing approach proposed by Kejriwal and Lopez (2013, Econometric Reviews 32(8), 892–927) is used to categorize SSA countries into growth shift, level shift and linear trend hypotheses based on the presence or not of breaks in slope and/or level of the trend function. The break dates are associated to major historical or economic events such as sociopolitical crisis, commodity price fluctuations on international market, the discovery and the exploitation of mineral deposits or unfavourable environmental and climatic conditions. The empirical evidences of appropriate unit root tests fail to reject the unit root hypothesis in all the countries, suggesting that a shock would have a permanent effect on growth process, and stabilization policies may be implemented in dealing with income fluctuations.     

The Error-in-Rejection Probability of meta-analytic panel tests

The puzzling Monte Carlo finding that the size distortion of meta-analytic panel unit root tests increases with the number of panel series is explained as the cumulative effect of arbitrarily small size distortions in the time series tests composing the panel test.     

Unemployment persistence in EU countries: new evidence using bounded unit root tests

We apply a series of bounded unit root tests to revisit the unemployment persistence in eight European Union (EU) countries. We find strong evidence in favour of the hysteresis hypothesis in all the cases. This result can be explained by a reduced labour mobility, a decreasing wage inflation and a high uncertainty regarding the future level of unemployment in the EU countries.     

The Phillips unit root tests for polynomials of integrated processes

In this paper, we derive the limiting distributions of the first order serial correlation coefficient and its t-statistic, which are the basis for the non-parametric unit root tests of Phillips (1987), for polynomials of integrated processes. The resulting limiting distributions depend upon nuisance parameters and in general the modification proposed by Phillips (1987), to achieve a nuisance parameter free limiting distribution, is not feasible for polynomials of integrated processes. For the special case of serially uncorrelated innovations, the limiting distributions are nuisance parameter free and are simulated. The distributions shift to the left with increasing variance for increasing polynomial orders.     

Forecasting with preliminary data: a comparison of two methods

This study examines two alternate methods, a vector autoregression error correction model and a state space model, to forecast revised United States trade balance figures. Both these methods incorporate preliminary and revised trade data. The results obtained from these methods were compared to the benchmark forecasts generated by revised-data-only models. This Study finds that the state space model performs worse than the benchmark. The vector autoregression model performs better than the benchmark only in the one-step forecast. These results indicate that incorporating preliminary data may not be useful in forecasting the revised data.     

Near unit root and the relationship between inflation and interest rates: A reexamination of the Fisher effect

Tests of the Fisher effect are plagued by high persistence in interest rates. Instead of standard regression analysis and asymptotic results, methods relying on local-to-unity asymptotics are employed in testing for the Fisher effect with monthly U.S. data covering the period 1953:1–1990:12. These procedures are extensions of a recently presented method (Cavanagh, Elliott and Stock (1995)) based on simultaneous confidence intervals, and they have the advantage of being asymptotically valid whether interest rates are integrated of order one or zero, or near unit root processes. Taking appropriately account of the near unit root problem the findings in most of the previous literature are reconfirmed. There is support for the Fisher effect in the interest rate targeting period (1953:1–1979:10) of the Federal Reserve but not in the 1979:11–1990:12 period. First version received: July 1999/Final version received: April 2000     

PPP in the 34 OECD countries: evidence from quantile-based unit root tests with both smooth and sharp breaks

Conventional unit root tests have mostly failed to validate the PPP. Quantile-based unit root tests by previous research have provided some support for the PPP. In this article, we take an additional step and incorporate sharp shifts and smooth breaks into the quantile-based unit root test and re-examine the PPP in each of the 34 OECD countries over the period 1994:01–2016:03. We find support for the PPP in 18 countries of Austria, Chile, Estonia, Finland, France, Germany, Italy, Korea, Mexico, Netherlands, New Zealand, Poland, Portugal, Slovenia, Sweden, Switzerland, Turkey and the United Kingdom.     

The weak form market efficiency investigation of American,European and Asian stock markets

This paper investigates the empirical validity of the Weak Form Efficient Market Hypothesis for American, European and Asian stock markets. Random Walk Hypothesis is used to prove weak form efficiency in American, European and Asian stock indices. ADF and PP Unit Root Tests have been used to test unit root in time series of daily data of American, European and Asian stock indices. Results show that sample of stock markets are weak-form efficient in terms of the Random Walk Hypothesis.     

The Polish exchange rate system: A unit root and cointegration analysis

In October 1991 Poland has established a crawling peg regime in which the zloty is tied to a currency basket and devalued with a monthly rate of crawl. If the monetary authorities are successful in defending the crawling peg the basket rate measured in Polish zloty is supposed to be stationary. Furthermore, a stable long-run relationship between the zloty-U.S. dollar rate and the basket's value expressed in U.S. dollar is expected to exist. The results of the unit root and cointegration analysis indicate that the monetary authorities have been able to defend the crawling peg for the sample periods under study, although it seems that not all requirements of the exchange rate regime have been met. The foreign exchange markets, however, have not supported the relationships derived from the crawling peg system after the introduction of the free floating system in April 2000.The final version of this paper has been prepared while I was a Jean Monnet Fellow at the European University Institute. I would like to thank the EUI for the award of the Fellowship and its hospitality. Moreover, I am grateful to Helmut Lütkepohl, Anja Schulz, Ralf Brüggemann, and two anonymous referees for many helpful comments and suggestions. I also thank the Deutsche Forschungsgemeinschaft, SFB 373, for financial support.     

Testing for panel unit roots in the presence of spatial dependency

In this article, the size and power properties of the Common-factor Im, Pesaran and Shin (CIPS), Wald (W), Likelihood Ratio (LR) and Lagrange Multiplier (LM) tests are investigated when the error term follows a spatial error model. In this study, the results from the Monte Carlo simulations, first, show that the CIPS test over-estimates the nominal size. Second, the simulation results show that the empirical size of the W test approaches the nominal size quickly, while the LR and LM tests underestimate the null hypothesis in both small and moderate sample sizes. Finally, the results also show that even though the LM and LR tests under-reject the true-null hypothesis they have higher power than the W test.     

Smooth structural breaks and the stationarity of the yen real exchange rates

This article examines and solves an interesting paradox in the literature that the tests for purchasing power parity (PPP) based on the yen real exchange rates (RERs) refute the PPP hypothesis more often than those with other major currency-based RERs, and the evidence is sensitive to the sample period used. Using a new empirical methodology accounting for both nonlinearity and multiple smooth temporary breaks in the data, we show that the puzzling finding is due to the failure to take into account the long but temporary large rise and fall in the yen RERs. The results illustrate that the yen RERs in the post-Bretton Woods period are likely mean reverting with linear or nonlinear adjustment toward large, long swing type of infrequent smooth temporary changes around constant equilibrium values, supporting the validity of PPP and resolving the paradox.     

Panel data modelling and the tax-spend controversy in the euro zone

This article attempts to differentiate between the debatable tax and spend, spend and tax, fiscal synchronization and institutional separation hypotheses in order to explore empirically the interplay between public expenditures and public revenues in the Economic and Monetary Union (EMU) member states. For this purpose, panel data models are derived to test the validity of the four hypotheses in EMU countries. A notable characteristic of this article is that the four hypotheses are tested by dividing EMU countries into various subgroups and using disaggregated data for government expenditures and revenues. Seeking for the robustness of the empirical evidence, the panel data methods of Generalized Two-Stage Least Squares (GTSLS) and Generalized Method of Moments (GMM) are accordingly applied to identify the relationship between public outlays and taxation receipts. GTSLS and GMM results strongly support the fiscal synchronization hypothesis implying that budget decision-making is significantly influenced by both government expenditures and revenues components.     

Economic analysis of BRAF gene mutation testing in real world practice using claims data: costs of single gene versus panel tests in patients with lung cancer

Aims: To assess the time to BRAF testing, compare the characteristics of tested vs not-tested patients, and describe the costs for sequential vs next-generation sequencing (NGS) BRAF testing.

Methods: Patients diagnosed with lung cancer after December 1, 2013 were identified from two US claims databases; their characteristics were assessed during the 12 months before diagnosis (index date). Testing modalities were analyzed from the index date to end of continuous health plan enrollment or data availability (December 2015), based on combinations of Current Procedural Terminology (CPT) procedure codes. Time to BRAF testing was assessed using Kaplan-Meier analysis. Costs were analyzed from a payer’s perspective.

Results: A total of 28,011 patients newly-diagnosed with lung cancer were identified. Of them, 1,260 (4.5%) were tested for BRAF: 3.2% and 4.2% were tested at 6 and 12 months, respectively, after the index date. Compared to non-tested patients, tested patients were younger (58.3 vs 65.3 years; p?<?.001), had a lower Charlson Comorbidity Index (2.8 vs 2.9; p?=?.005), and a higher proportion had metastases (70.9% vs 43.4%; p?<?.001). In 76.0% of cases, BRAF was tested along with KRAS. BRAF was tested using NGS in 6.6% of cases. The average reimbursed amounts for the 10 most common CPT code combinations were $207–$2,074. Using the average costs of individual mutation tests, the total cost of sequential testing comprising KRAS, EGFR, ALK, ROS1, and BRAF tests was $3,763 ($464, $696, $1,070, $1,127, and $406, respectively), that of NGS was $2,860.

Limitations: Claims data did not include BRAF test results.

Conclusions: Among patients newly-diagnosed with lung cancer, 4.5% were tested for BRAF. Tested patients were younger and had a lower comorbidity burden, but more advanced disease. While reimbursed amounts varied greatly based on combinations of testing procedures, NGS testing was associated with cost savings compared to sequential testing of individual mutations.     

Price convergence of peripheral European countries on the way to the EMU: A time series approach

This paper examines price and inflation convergence between three European countries (Italy, Spain and the U.K.) and a European average and, alternatively, between them and Germany from the beginning of the 80's.  For this purpose the long-run stochastic relationships on prices derived from the convergence criteria agreed in the Maastricht Treaty are analyzed. In order to do this, some recent unit root tests have been applied as well as time-varying parameters models.  The results reject the long-run convergence hypothesis in all the cases but allow us to accept the existence of catching-up with the European average and Germany in some cases depending on the nature of the prices and on the countries considered. First version received: March 1997/final version received: May 1999     

Comparisons of robust tests for shifts in trend with an application to trend deviations of real exchange rates in the long run

We study the finite sample properties of tests for structural changes in the trend function of a time series that do not require knowledge of the degree of persistence in the noise component. The tests of interest are the quasi-Feasible Generalized Least Squares (FGLS) procedure by Perron and Yabu (2009b Perron, P and Yabu, T. 2009b. Testing for shifts in trend with an integrated or stationary noise component. Journal of Business and Economic Statistics, 27: 369–96. [Taylor &; Francis Online], [Web of Science ®] , [Google Scholar]) and the weighted average of the regression t-statistics by Harvey et al. (2009 Harvey, DI, Leybourne, SJ and Taylor, AMR. 2009. Simple, robust, and powerful tests of the breaking trend hypothesis. Econometric Theory, 25: 995–1029. [Crossref], [Web of Science ®] , [Google Scholar]), both of which have the same limit distribution whether the noise component is stationary or has a unit-root. We analyse the finite sample size and power properties of these tests under a variety of Data-Generating Processes (DGPs). The results show that the Perron–Yabu test has greater power overall. With respect to the size, the Harvey–Leybourne–Taylor test exhibits larger size distortions unless a moving-average component is present. Using the Perron and Yabu procedure to test for structural changes in the trend function of long-run real exchange rates with respect to the US dollar indicates that for 17 out of 19 countries, the series have experienced a shift in trend since the late nineteenth century.     

中国区域经济增长协整分析与区域政策选择--兼论"中部塌陷"现象

文章运用协整分析方法,对我国东部、中部、西部三个地区经济增长之间的相互关系进行了探讨,协整分析和葛兰杰因果关系检验的结果是西部经济增长与中部、东部经济增长均有协整关系,但中部与东部经济增长之间没有协整关系;西部经济增长促进了东部经济的增长,东部反过来也促进了西部经济的增长,但对中部经济增长的作用不大;中部不是东部和西部经济增长的葛兰杰原因,由此显示出我国区域经济非协调发展的基本特征。在实证分析的基础上,文章还对中国区域经济非协调发展及“中部塌陷”的机理作了理论分析,并给出了一些相关的政策建议。     

A reassessment of total factor productivity convergence: Evidence from cross-country analysis

This study revisits total factor productivity (TFP) convergence by employing the latest Lagrange multiplier and residual augmented least squares Lagrange multiplier unit root tests and Phillips and Sul panel club convergence technique. The study uses annual data for 44 developing and 29 developed countries covering the time-period 1970–2014. Our findings from these unit root tests support evidence of TFP convergence. Region-based results (Africa, Asia, and Latin America and the Caribbean) also confirm TFP convergence. Further, results derived from the Phillips and Sul test support evidence of TFP convergence, although the speed of convergence varies by region. The highest speed is noted in the Asia region, whereas, the lowest of speed productivity convergence is observed in the Africa region.     

安徽省居民消费、投资与经济增长关系的实证研究

运用协整理论,从长期和短期两个角度对安徽省居民消费、固定资产投资与经济增长之间的关系进行了实证分析。结果表明:三者之间存在着长期稳定的关系,居民消费、固定资产投资对经济增长均具有促进作用。政府应努力调整投资与消费比例,逐步形成"消费主导型"的经济增长模式,提高经济增长的质量。     

Nonlinearity and stationarity of inflation rates: evidence from the euro-zone countries

Earlier studies hardly reject the hypothesis of a unit root in inflation. Few studies have examined the possibility of nonlinearity in inflation and tested nonlinear stationarity of the inflation rates. This study thus intends to fill the gap. This study utilizes the tests for nonlinearity along with the unit root tests that allow for nonlinearity in the variables to examine the stationarity of inflation rates of 12 European countries that formed the Euro Zone (EZ) later in the sample period. The results suggest that the majority of these countries’ inflation rates can be characterized by mean reversion during the floating exchange rate period. Many of them appear to be nonlinear stationary. This finding is essential in conducting applied economic studies for these countries, when constructing models whose validity relies on whether or not inflation is stationary. The results of this study also imply that shocks to inflation have a transitory effect on inflation in the euro area. Therefore, it would be less costly in exercising the policies of disinflation for the monetary authorities of the euro area than for those of the countries with nonstationary inflation.