In this paper, we consider two-stage least squares (2SLS) and simple instrumental variable (IV) type estimation of dynamic panel data models with both individual-specific effects and heterogeneous time trend when both N and T tend to infinity. We consider the forward orthogonal deviations (FOD) proposed by (Hayakawa, et al. Econometric Reviews, 2019. Vol. 38, pp. 1055–1088) and the double first difference

This paper evaluates and compares the effects of conventional and unconventional monetary policies on the corporate debt structure in the United States. It does so by using a vector autoregression in which policy shocks are identified through high-frequency external instruments. Our results show that both monetary policies shift the firms’ composition of external financing, though in a different way

We provide an alternative econometrics methodology to estimate a standard heterogeneous income profiles (HIP) model. Our alternative setup allows for the HIP coefficients to be fixed in the sense that they can be arbitrarily correlated with the explanatory variables of the HIP equation and can be treated as parameters to be estimated. As an empirical application, we analyse the extent to which different

This study is unique in exploiting 12 youth cohorts (aged 11–15) from the British Household Panel Survey (BHPS) and the UK Household Longitudinal Study (UKHLS) spanning 1996–2017 to investigate the gender gradient of adolescent life satisfaction. We find robust evidence of a cross-cohort gender gap particularly at the extremes of the adolescent life satisfaction distribution. Male adolescents are significantly

This paper studies the dynamics of the scarring effect of youth unemployment over the business cycle in 12 European countries. On the one hand, we analyse differences associated with the negative effect of past unemployment experiences on future labour market status. And, on the other hand, we consider the potential stigmatization of prospective young workers – that is, the extent to which employers

This empirical study for private consumption in the euro area and the four largest euro area countries validates the need to separate components of income and supports the common practice to split wealth. A focus on income and wealth components avoids an aggregation bias in estimated income and wealth effects. It finds little evidence in favour of an extensive country aggregation issue given direct

Hard lockdowns have left policymakers to face the ethical dilemma of choosing between saving lives and saving the economy. However, massive testing could have helped to respond more effectively to Covid-19 crisis. In this paper, we study the trade-off between infection control, lockdown and testing. The aim is to understand how these policies can be effectively combined to contain Covid-19 without

Local government mergers are an important policy issue in many countries, yet empirical evidence of the effects of merging and of local government size on the production and quality of local public services is scarce. We use the spatial and temporal variation in forced mergers between cities and their surrounding local governments in Norway to provide quasi-experimental evidence of the effect on long-run

Whenever treatment effects are heterogeneous, and there is sorting into treatment based on the gain, monotonicity is a condition that both instrumental variable (IV) and fuzzy regression discontinuity (RD) designs must satisfy for their estimate to be interpretable as a local average treatment effect. However, applied economic work often omits a discussion of this important assumption. A possible explanation

In this paper, we examine the labour market implications of permanent illness or injury from conflict among civilians. From 1969 to 1998, Northern Ireland experienced a violent ethnopolitical conflict characterized by terrorist bombing campaigns, sectarian killings and armed forces patrolling the streets. The consequences of this period for current high work disability rates are disputed by the main

In this paper, we investigate the international effects of euro rate forward guidance (FG) and compare them to spillovers from a conventional monetary policy shock (MP). We identify the forward guidance shock via a combination of zero and sign restrictions that use the relationship between expectations and observed data and additionally draw on insights from recent event studies using high‐frequency

In dynamic factor models, factors are often extracted using principal components with their asymptotic confidence regions having empirical coverages below the nominal ones when the temporal dimension is small. We propose a subsampling procedure to compute the factor loadings uncertainty and correct the asymptotic covariance matrix of the extracted factors. We show that the empirical coverages of the

In this paper, we assess the information content and predictive ability of various risk and uncertainty measures in predicting various measures of real economic activity as well as undertake a comparative analysis of the relative importance of uncertainty, monetary policy and leverage shocks in the macroeconomic business cycle. We find that the macroeconomic uncertainty index and the Chicago Fed national

Studies on the relationship between housing prices and firm behaviours have focused on the relationship between housing prices and firm financing and investment decisions. However, housing prices may affect other firm decisions. This study investigates the impact of housing prices on manufacturing firm productivity in China. To identify the causal effect, we use a national land regulation policy and

Recessions and subsequent recoveries are frequently classified as ‘L‐shaped’ or ‘U‐shaped’, with output losses in the former being permanent and losses in the latter at least partially made up by higher than average growth during the recovery. We estimate the probability of a U‐shaped recovery for postwar NBER recessions. Most earlier recessions were U‐shaped but more recent recessions have been L‐shaped

A large body of evidence documents the educational and labour market returns to birth weight, which are reflected in investments in large social safety net programmes targeting birth weight and early life health. However, there is no direct evidence on the private valuation of birth weight. In this paper, we estimate the willingness to pay for birth weight in the United States, using a series of discrete

We analyse the consequences of experiencing bullying victimization in junior high school, using data on a cohort of English adolescents. The data contain self-reports of five types of bullying and their frequency, for three waves, when the pupils were aged 13–16 years. We assess the effects of bullying victimization on short- and long-term outcomes, including educational achievements, income and mental

This paper investigates the role of domestic and global determinants of core inflation in the euro area. We analyse the entire conditional distribution of inflation by estimating a Phillips curve type relationship with the method of expectile regression, here extended to capture time-varying effects. Both domestic and foreign output gap appear to drive euro area core inflation. Domestic output gap

We estimate a monthly interacted-VAR model for euro area macroeconomic aggregates allowing for the impact of uncertainty shocks to depend on the state of the average outlook for the economy measured by survey data. We find that, in response to an uncertainty shock, the peak decrease in industrial production and inflation is around three and a half times larger during pessimistic times. We build an

This paper proposes a nonlinear unit root test based on the autoregressive neural network process for testing unemployment hysteresis. In this new unit root testing framework, the linear, quadratic and cubic components of the neural network process are used to capture the nonlinearity in a given time series data. The theoretical properties of the test are developed, while the size and the power properties

I test whether public‐sector ownership reduces conventional measures of market risk by using an event exogenous to the air transportation sector. I find that government‐sponsored enterprises show lower price volatility than non‐government‐sponsored enterprises, arguably due to the government’s ability to buffer government‐sponsored enterprises against demand and cost shocks. The upshot for jurisdictions

In this study, we propose a spatial stochastic volatility model in which the latent log‐volatility terms follow a spatial autoregressive process. Though there is no spatial correlation in the outcome equation (the mean equation), the spatial autoregressive process defined for the log‐volatility terms introduces spatial dependence in the outcome equation. To introduce a Bayesian Markov chain Monte Carlo

We show that, when performance on a math test depends on students’ endurance, longer tests do not necessarily provide a more accurate measure of students’ competencies or a higher correlation between the ranking of classes (or schools) based on test performance and the ranking based on the underlying competencies. We revisit the finding that female teenagers are better able to sustain performance during

This study provides a quantitative review of the empirical literature on partisan politics. Given the voluminous work on this subject, we focus on the relationship between government ideology and public spending. By exploiting a dataset of 800 estimates from papers published between 1992 and 2018, we find no evidence of publication bias. Taking into account the differences in the various categories

This study examines whether foreign direct investment inflows facilitate upgrading of export quality in host countries. The analysis focuses on the Russian Federation and uses customs data merged with firm‐level information from ORBIS. The results show a positive relationship between the quality of products exported by domestic firms and the presence of foreign affiliates in the upstream (input‐supplying)

This study investigates the impact on first hiring outcomes of two main curriculum vitae (CV) characteristics by which graduates with a tertiary education degree distinguish themselves from their peers: degree class and extra-curricular activities. These characteristics were randomly assigned to 2,800 fictitious job applications that were sent to real vacancies in Belgium. Academic performance and

This paper examines whether childcare choice affects the early childhood development of children aged 7–59 months. Using the data from Chinese Family Panel Studies, we look at household choices between parental and grandparental cares and the timing of four key early life achievements – walking, talking, counting and toilet training. We conceptualize early childhood development within a household production

We study the time‐varying effects of financial uncertainty shocks in the United States using a vector autoregression with drifting parameters and stochastic volatilities. We find negative effects of financial uncertainty shocks on real activity with both consumption and investment growth declining significantly and comoving along the entire sample. These effects remained fairly stable in the post‐WWII

The international development community has used the World Bank's Statistical Capacity Index since its inception in 2004. The Sustainable Development Goals create new challenges for national statistical systems to produce high-quality and internationally comparable data. This paper reviews measurement methodologies, posits desired attributes, and presents theoretical and empirical frameworks to propose

This paper introduces a simple and easy to implement procedure to test for changes in persistence. The time-varying parameter that characterizes persistence changes under the alternative hypothesis is approximated by a parsimonious cosine function. The new test is the minimum of a t-statistic computed from a test regression that considers a set of reasonable values for a frequency term that is used

We introduce a set of test statistics for assessing the presence of regimes in out of sample forecast errors produced by recursively estimated linear predictive regressions that can accommodate multiple highly persistent predictors. Our test statistics are designed to be robust to the chosen starting window size and are shown to be both consistent and locally powerful. Their limiting null distributions

While pseudo‐panels are useful when only repeated cross‐section data are available, estimates are likely to be attenuated and suffer from sampling error if cell sizes (number of individuals grouped together in a cohort) are too few. However, there is no consensus on how large cell size needs to be, with recommendations ranging from 100 to several thousands. This is due to sampling error being affected

In this study, using an ex ante measure, we examine the convergence patterns in sovereign defaults among 101 developing countries for the period from 1990 to 2015. We employ the club convergence algorithm to determine convergence paths across countries and examine the role of institutions in shaping the observed convergence patterns. The merging of clubs reveals three distinct convergent sub‐clubs

Night lights data are increasingly used in applied economics, almost always from the Defense Meteorological Satellite Program (DMSP). These data are old, with production ending in 2013, and are flawed by blurring, lack of calibration and top‐coding. These inaccuracies in DMSP data cause mean‐reverting errors. This paper shows newer and better VIIRS night lights data have 80% higher predictive power

I exploit a panel data set on United States for the time span 1990–2013 to evaluate the causal impact of government regulation on bureaucratic corruption. Despite the stylized fact that corruption and regulation are positively correlated, there is a lack of empirical evidence to substantiate a causal relationship. Using novel data on federal regulation of industries (Al-Ubaydli and McLaughlin [2015]

In order to make forward‐looking policy decisions, the Fed relies on imperfect forecasts of future macroeconomic conditions. If the Fed’s forecasts are rational, then the difference between the actual outcome and the Fed’s forecast is exogenous to the information set of the Fed at the time the forecast was produced. We investigate the effect of the Fed’s forecast errors on output and price movements

In this paper, we propose a method for real‐time prediction of recessions using large sets of economic and financial variables with mixed frequencies. This method combines a dynamic factor model for the extraction of economic and financial conditions together with a tailored Markov regime switching specification for capturing their cyclical behaviour. Unlike conventional methods that estimate a single

Macroeconomic variables are weighted averages of a large number of components. Our objective is to model and forecast all of the N components of a macro variable. The main feature of our proposal consists of discovering subsets of components that share single common trends while neither assuming pervasiveness nor imposing special restrictions on the serial or cross‐sectional idiosyncratic correlation

How do nationwide environmental regulations produce heterogeneous effects on the economic activities of manufacturing firms located in places with differently incentivized city leaders? This paper answers this question by drawing on a set of firm‐based pollution regulations in China from 2007 to investigate the relationship between political incentives and the effects of environmental regulations.

In this comment I illustrate that in the model of (Lee et al. (2019). Oxford Bulletin of Economics and Statistics. Vol. 81, pp. 80–97), firm profit maximizing implies that Assumption 2 and Equation 14 may be contradictory. More specifically, there is generally a contradiction when investment is used as the control variable, but there is generally not a contradiction when a static input like material

We study gender differences in the evaluation of submissions to economics conferences. Using data from the Annual Congress of the European Economic Association (2015-2017), the Annual Meeting of the Spanish Economic Association (2012-2017), and the Spring Meeting of Young Economists (2017), we find that all-female-authored papers are 3.2 p.p. (6.8%) less likely to be accepted than all-male-authored

This paper characterizes optimal commitment policy in the New Keynesian model using a recursive formulation of the central bank's infinite‐horizon optimization problem in which promised inflation and output gap – as opposed to lagged Lagrange multipliers – act as pseudo‐state variables. Our recursive formulation is motivated by (Kydland, F. and Prescott, E. C. (1980). Journal of Economic Dynamics and

Testing the predictability of the predictive regression model is of great interest in economics and finance. Recently, (Zhu et al. (2014) Predictive regressions for macroeconomic data, Vol. 8, pp. 577–594.) proposed a unified test to account for this issue. Their test has a desirable property that its limit distribution is standard regardless of the regressor being stationary, near unit root or unit

The growth of globalization in recent decades has increased the importance of external factors as drivers of the business cycle in many countries. Globalization affects countries not just at the macro level but at the level of states and metro areas as well. This paper isolates the relative importance of global, national and region-specific shocks as drivers of the business cycle in individual U.S

This paper studies the spillover effects of the ECB's monetary policies on non‐euro area countries, using a GVAR methodology, shadow rate for advanced economies (Wu and Xia, 2016) and shock identification through Cholesky decomposition. A euro‐area shadow interest rate hike triggers a broad‐based decline in output abroad, especially in Central, Eastern and South‐Eastern European (CESEE) economies,

Using data from the Korea Labor Income Panel Study, we study the evolution of income risk and consumption insurance against transitory and permanent income shocks in South Korea over the last two decades. We find a decreasing trend in both income and consumption risks. Furthermore, we estimate that 47.6% of permanent income shocks and 9.8% of transitory income shocks pass through to consumption. We

By adopting an identification strategy of difference‐in‐difference estimation combined with propensity score matching between liberalized and closed countries, this paper provides robust evidence that opening the capital account is associated with an increase in income inequality in developing countries. Specifically, capital account liberalization, in the long run, is associated with a reduction in

We formulate a general cointegrated vector autoregressive (CVAR) model that nests both a class of consumption Euler equations and various Keynesian type consumption functions. Using likelihoodbased methods and Norwegian data, we find support for cointegration between consumption, income and wealth once a structural break around the financial crisis is allowed for. That consumption cointegrates with

We study the impact of Economic Policy Uncertainty (EPU) on the US Economy by using a VAR with time‐varying coefficients. The coefficients are allowed to evolve gradually over time which allows us to discover structural changes without imposing them a priori. We find three different regimes, which match the three major periods of the US economy, namely the Great Inflation, the Great Moderation and

The paper investigates the estimation bias of autoregressive models for bounded near‐integrated stochastic processes and the performance of the standard procedures in the literature that aim to correct the estimation bias. In some cases, the bounded nature of the stochastic processes worsens the estimation bias effect. The paper extends two popular autoregressive estimation bias correction procedures

In this paper, we propose a new method called the total variance method and algorithms to compute and analyse variance decomposition for nonlinear economic models. We provide theoretical and empirical examples to compare our method with the only existing method called generalized forecast error variance decomposition (GFEVD). We find that the results from the two methods are different when shocks are

The incomes of top earners are typically top‐coded in survey data. I show that the accuracy of imputed income values for top earners in longitudinal surveys can be improved significantly by incorporating information from multiple time periods into the imputation process in a simple way. Moreover, I introduce an innovative, nonparametric empirical Bayes imputation method that further improves imputation

We propose a general framework for Maximum Likelihood (ML) and Bayesian estimation of income distributions based on grouped data information. The asymptotic properties of the ML estimators are derived and Bayesian parameter estimates are obtained by Monte Carlo Markov Chain (MCMC) techniques. A comprehensive simulation experiment shows that obtained estimates of the income distribution are very precise

An asymptotic distribution is derived for the least squares (LS) estimate of a first‐order autoregression with a mildly explosive root and anti‐persistent errors. While the sample moments depend on the Hurst parameter asymptotically, the Cauchy limiting distribution theory remains valid for the LS estimates in the model without intercept and a model with an asymptotically negligible intercept. Monte

This paper explores whether unconventional monetary policy operations have redistributive effects on household wealth. Drawing on household balance sheet data from the Wealth and Asset Survey, we construct monthly time series indicators on the distribution of different asset types held by British households for the period that the monetary policy switched, as the policy rate reached the zero-lower

This paper introduces a new class of tractable asymmetric heteroskedastic models, the good and bad volatility (GBV). Asymmetry is recognized in the dynamics of GBV components that correspond to positive and negative shocks respectively. The GBV model allows both conditional semivariances to evolve according to two separate functional forms with different semi‐definite distributions. An empirical application

Most existing methods for testing cross‐sectional dependence in fixed effects panel data models are actually conducting tests for cross‐sectional uncorrelation, which are not robust to departures of normality of the error distributions as well as nonlinear cross‐sectional dependence. To this end, we construct two rank‐based tests for (static and dynamic) fixed effects panel data models, based on two

We provide novel evidence on the effects of ill-health on the dynamics of labour state transitions by considering retirement as mobility between full-time work, part-time work, self-employment and inactivity. We employ a dynamic multi-state model which accounts for state dependence and different types of unobservables. Our model allows for both individual heterogeneity and labour-state gravity as well

We analyse the welfare impact of greater wage flexibility in the presence of an occasionally binding zero lower bound (ZLB) constraint on the nominal interest rate. We show that the ZLB constraint generally amplifies the adverse effects of greater wage flexibility on welfare when the central bank follows a conventional Taylor rule. When demand shocks are the driving force, the ZLB implies that an increase

Using firm-level data, this paper shows that the Portuguese financial crisis was a period of intensified productivity-enhancing reallocation. Aggregate productivity gains, both in manufacturing and services, came from relatively higher contributions of entering and exiting firms and from reallocation of resources between surviving firms. At the microlevel, the crisis reduced the probability of survival