Misleading Inferences from Panel Unit Root Tests: a Comment

In their 2001 paper, Breuer, McNown, and Wallace argue that panel unit root tests are flawed in that the “all or nothing nature of these procedures may lead to serious misinterpretations of tests applied to mixed panels” (2001, p. 483). The authors propose an alternative test, the SURADF test, which allows for and estimates heterogeneous rates of convergence. We show that SURADF test results are highly sensitive to the selection of panel members. As such, application of the SURADF test seems to require a sound basis for panel member selection and a caveat that all results are panel‐specific.     

FDI, Regional Economic Integration and Endogenous Growth: Some Evidence from Southeast Asia

This empirical study investigates whether FDI caused spillover effects which led to the economic growth of the ASEAN‐5 economies (1970–96), and, if that is so, whether the ASEAN Preferential Trade Agreement (APTA) had a significant effect in attracting FDI to the region. Its findings are that FDI has stimulated economic growth most effectively through human factors, and knowledge/technological learning‐by‐doing effects; and that the formation of the APTA had a lagged influence on FDI inflows to the advantage of the more‐developed member countries, and disadvantage of the less‐developed member countries.     

Some causes of interstate differences in community bank performance

This study assesses the relationship between the performance of community banks and conditions in their marketplaces over the 1994–2008 period. A panel model is used, in which the states serve as the panels, and focuses on banks termed community financial institutions (CFIs). Bank performance is measured by the return on assets (ROA). The ROAs are averaged for all CFIs in each state. Statewide ROAs are related to each state’s economic, demographic, and market structure characteristics. These state-level characteristics explain some of the variations in the performance of each state’s CFIs over time, and results are economically and financially reasonable. Fixed effects play a role, linking each state’s performance to unidentified factors unique to each state. The mild (but statistically significant) explanatory power of the economic/demographic variables suggests that CFI managers can effectively deal with economic/demographic changes in their marketplace, in contrast to the troubles of big banks.     

Sales contest effectiveness: An examination of sales contest design preferences of field sales forces

Sales contests, a widely used form of sales force special incentives, receive considerable attention in the trade and academic press. While understanding salespersons’ preferences for various contest designs is a critical first step for understanding how sales contests motivate salespeople to pursue contest goals, a knowledge gap exists in understanding design preferences. With expectancy theory serving as a theoretical basis, the authors develop hypotheses about preferences for sales contest components. Following tests of hypotheses using survey and conjoint data provided by field sales forces from three companies, exploratory analyses of how individual, supervisory, and sales setting characteristics may affect preferences suggest potential boundary conditions for initial findings. The results lead to an improved awareness of the determinants of contest design preferences as well as insights and implications for sales managers seeking to design effective contests.     

Obtaining legacies ‘face-to-face’

This paper is a general overview on how to obtain legacies. It must be remembered that the element of legacy fundraising which involves face-to-face techniques is the culmination of a properly organised and researched campaign, and cannot in any circumstances be done without a great deal of other essential preparatory work. Legacies account for nearly a half of all voluntary income in the UK, yet even now very few charities have developed a really effective all round legacy campaign integrated into their overall fundraising strategy. This paper is an attempt to give some insight into this potentially important income stream and is designed to give every fundraiser some helpful ideas, whether working for a large established national charity or a very small, local, recently formed voluntary group.     

A possible explanation of the ‘Exchange Rate Disconnect Puzzle’: a common solution to three macroeconomic puzzles?

Meese and Rogoff (1983) and subsequent studies find that economic fundamentals are apparently not able to explain exchange rate movements, but we argue that this so-called ‘Exchange Rate Disconnect Puzzle’ arose because researchers such as Meese and Rogoff (1983) did not use the right fundamentals and because they did not allow for the forward-looking nature of exchange rate determination. Further, because they apparently were not aware that financial markets by themselves could not equalize interest rates across countries, they did not properly appreciate that the exchange rate is strongly influenced by agents’ expectations of aggregated differences in local returns. Thus, we believe that the same underlying explanation provided by Ford (2015) and Ford and Horioka (2016a, 2016b) for the Feldstein-Horioka (1980) Puzzle and the PPP Puzzle – namely that financial markets alone cannot achieve net transfers of financial capital and cannot equalize real interest rates across countries – also helps explain why previous attempts to connect changes in the exchange rate to economic fundamentals have not been successful and so can also be said to contribute to solving the Exchange Rate Disconnect Puzzle.     

Scale effects found!

A key feature of early endogenous growth models is their prediction of scale effects – the larger the economy, as measured by population, the number of firms or employment, the faster the economy should grow. However, empirical work has failed to support the existence of scale effects. As a result, much human capital has been expended in order to ‘fix’ this problem by eliminating scale effects in endogenous growth models. We contend that econometric techniques used in the empirical search for scale effects are inconsistent with growth theory. Using data from US states and an econometric technique that better matches growth theory by allowing each economy to have its own steady state, we provide empirical support for the existence of scale effects. Results call into question the need to reformulate the first models of endogenous growth.     

Saying Sayonara to the Farm: Hierarchical Bayesian Modeling of Farm Exits in Japan

Off‐farm employment opportunities are thought to have an effect on farm exit rates, though evidence on the sign of this effect has been mixed. Examining this issue in the context of Japanese agriculture, we find that farm exits are related to off‐farm income as a share of household income, and more specifically to the nature of off‐farm work. Two econometric models are developed: a hierarchical Bayesian linear model and a hierarchical Bayesian Poisson model. Both models perform well in predicting exit rates across the towns and prefectures of Japan.