A new poolability test for cointegrated panels

This paper proposes a new test of the null hypothesis that the parameters in a cointegrated panel data regression are equal across the cross‐section. The asymptotic distribution of the new test statistic is derived and simulation results are provided to suggest that it performs very well in small samples. An empirical application to the monetary exchange rate model is also provided. Copyright © 2009 John Wiley & Sons, Ltd.     

Testing for Convergence in Carbon Dioxide Emissions Using a Century of Panel Data

This paper tests the convergence in per-capita carbon dioxide emissions for a collection of developed and developing countries using data spanning the period 1870–2002. For this purpose, three recently developed panel unit root tests that permit for dependence among the individual countries are employed. The results lend strong support in favor of convergence for the panel as a whole. Estimates of the speed of this convergence is also provided.      

Exporting May Not Always Boost Firm Productivity

A large empirical literature suggests the performance characteristics of firms that export are different from firms that do not. Specifically, exporters tend to be larger, more productive and pay higher wages than non-exporters. This paper reports on an econometric analysis of the characteristics of exporters and non-exporters in Swedish manufacturing industry. We use matching and difference-in-differences analysis to investigate a panel data set on a large number of firms and spanning almost 20 years. Some of our results echo those reported elsewhere. However, in contrast to the findings for every other country analysed so far, we find that the performance characteristics of exporters and non-exporters are remarkably similar. In particular, we find no evidence of pre- or post-entry differences in firm level productivity. This is a striking outcome, probably driven by the extremely high openness of the Swedish economy. JEL no. F14     

A note on the use of the LLC panel unit root test

One of the single most cited studies within the field of nonstationary panel data analysis is that of LLC (Levin et al. in J Econom 98:1–24, 2002), in which the authors propose a test for a common unit root in the panel. Using both theoretical arguments and simulation evidence, we show that this test can be misleading unless it is based on the same bandwidth selection rule used by LLC.     

Panel cointegration tests of the Fisher effect

Most empirical evidence suggests that the Fisher effect, stating that inflation and nominal interest rates should cointegrate with a unit slope on inflation, does not hold, a finding at odds with many theoretical models. This paper argues that these results can be attributed in part to the low power of univariate tests, and that the use of panel data can generate more powerful tests. For this purpose, we propose two new panel cointegration tests that can be applied under very general conditions, and that are shown by simulation to be more powerful than other existing tests. These tests are applied to a panel of quarterly data covering 20 OECD countries between 1980 and 2004. The evidence suggest that the Fisher effect cannot be rejected once the panel evidence on cointegration has been taken into account. Copyright © 2007 John Wiley & Sons, Ltd.     

Wage Effects of Labour Migration with International Capital Mobility

Wage effects of immigration are investigated in a setting with international capital mobility, which eliminates two‐thirds of the native wage effects of immigration. Without international capital mobility, overall gains from migration in the immigration region are only a small fraction of total losses to native workers, but with perfect international capital adjustment, overall gains are larger than total losses to native workers. Two alternative tax policies to eliminate the negative wage effects of immigration on low‐skilled native workers are evaluated.     

A sequential purchasing power parity test for panels of large cross-sections and implications for investors

In this paper we use monthly time series data for not less than 64 countries and a new sequential approach to test for purchasing power parity (PPP). The results are strong in that the evidence in favor of PPP is very weak. In fact, for the US-dollar-based exchange rates the evidence is basically non-existent. In order to eliminate the effect of the base currency, we also apply the sequential PPP test to all pairs of exchange rates, and find similarly weak evidence of PPP. However, for those rates where evidence is found, using a technical trading rule, we find evidence of significant profits. The predictability of the stationary pairs is therefore important for investors.     

A modified LLC panel unit root test of the PPP hypothesis

In a recent study, Westerlund (Empir Econ 37:517–531, 2009) shows that the performance of the popular LLC (Levin et al., J Econ 108:1–24, 2002) panel unit root test depends critically on the choice of lag truncation used when correcting for serial correlation, and that it is only when this parameter is set as a function of time that the power raises above size. The purpose of the current paper is to propose a modified test that does not suffer from this drawback. The new test is not only simpler to compute but also superior in terms of small-sample performance, which is illustrated using an example purchasing power parity for less developed countries.