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Working Paper
Long-run effects in large heterogenous panel data models with cross-sectionally correlated errors
Chudik, Alexander; Pesaran, M. Hashem; Raissi, Mehdi; Mohaddes, Kamiar (2015-01-01)
This paper develops a cross-sectionally augmented distributed lag (CS-DL) approach to the estimation of long-run effects in large dynamic heterogeneous panel data models with cross-sectionally dependent errors. The asymptotic distribution of the CS-DL estimator is derived under coefficient heterogeneity in the case where the time dimension (T) and the crosssection dimension (N) are both large. The CS-DL approach is compared with more standard panel data estimators that are based on autoregressive distributed lag (ARDL) specifications. It is shown that unlike the ARDL type estimator, the CS-DL ...
Globalization Institute Working Papers , Paper 223

Working Paper
Breaking down world trade elasticities: a panel ECM approach
Martinez-Martin, Jaime (2016-07-18)
This paper exhaustively analyses the recent decline of international trade elasticities to output growth. We extend an empirical model of import demand functions to account not only for transitory factors, such as relative prices and import intensity-adjusted measures of demand (I-O Tables), but also for habitually neglected permanent factors such as protectionism, vertical integration (i.e. Global Value Chains) and foreign direct investment (FDI). Dealing with a non-stationary heteregenous panel of 27 countries, we estimate a panel Error Correction Model from 1960 to 2015 in order to break ...
Globalization Institute Working Papers , Paper 275

Working Paper
Pooled Bewley Estimator of Long-Run Relationships in Dynamic Heterogenous Panels
Smith, Ron P.; Chudik, Alexander; Pesaran, M. Hashem (2023-11-08)
Using a transformation of the autoregressive distributed lag model due to Bewley, a novel pooled Bewley (PB) estimator of long-run coefficients for dynamic panels with heterogeneous short-run dynamics is proposed. The PB estimator is directly comparable to the widely used Pooled Mean Group (PMG) estimator, and is shown to be consistent and asymptotically normal. Monte Carlo simulations show good small sample performance of PB compared to the existing estimators in the literature, namely PMG, panel dynamic OLS (PDOLS) and panel fully-modified OLS (FMOLS). Application of two bias-correction ...
Globalization Institute Working Papers , Paper 409

Working Paper
A Robust Method for Microforecasting and Estimation of Random Effects
Giacomini, Raffaella; Lee, Sokbae; Sarpietro, Silvia (2023-08-02)
We propose a method for forecasting individual outcomes and estimating random effects in linear panel data models and value-added models when the panel has a short time dimension. The method is robust, trivial to implement and requires minimal assumptions. The idea is to take a weighted average of time series- and pooled forecasts/estimators, with individual weights that are based on time series information. We show the forecast optimality of individual weights, both in terms of minimax-regret and of mean squared forecast error. We then provide feasible weights that ensure good performance ...
Working Paper Series , Paper WP 2023-26

Report
A Jackknife Variance Estimator for Panel Regressions
Lopez Gaffney, Ignacio; Crump, Richard K.; Gospodinov, Nikolay (2024-10-01)
We introduce a new jackknife variance estimator for panel-data regressions. Our variance estimator can be motivated as the conventional leave-one-out jackknife variance estimator on a transformed space of the regressors and residuals using orthonormal trigonometric basis functions. We prove the asymptotic validity of our variance estimator and demonstrate desirable finite-sample properties in a series of simulation experiments. We also illustrate how our method can be used for jackknife bias-correction in a variety of time-series settings.
Staff Reports , Paper 1133

Working Paper
Half-panel jackknife fixed effects estimation of panels with weakly exogenous regressor
Chudik, Alexander; Yang, Jui-Chung; Pesaran, M. Hashem (2016-08-31)
This paper considers estimation and inference in fixed effects (FE) panel regression models with lagged dependent variables and/or other weakly exogenous (or predetermined) regressors when NN (the cross section dimension) is large relative to TT (the time series dimension). The paper first derives a general formula for the bias of the FE estimator which is a generalization of the Nickell type bias derived in the literature for the pure dynamic panel data models. It shows that in the presence of weakly exogenous regressors, inference based on the FE estimator will result in size distortions ...
Globalization Institute Working Papers , Paper 281

Working Paper
A Closer Look at the Behavior of Uncertainty and Disagreement: Micro Evidence from the Euro Area
Tracy, Joseph; Rich, Robert W. (2018-09-28)
This paper examines point and density forecasts of real GDP growth, inflation and unemployment from the European Central Bank?s Survey of Professional Forecasters. We present individual uncertainty measures and introduce individual point- and density-based measures of disagreement. The data indicate substantial heterogeneity and persistence in respondents? uncertainty and disagreement, with uncertainty associated with prominent respondent effects and disagreement associated with prominent time effects. We also examine the co-movement between uncertainty and disagreement and find an ...
Working Papers (Old Series) , Paper 1813

Working Paper
How have global shocks impacted the real effective exchange rates of individual Euro area countries since the Euro's creation?
Mehl, Arnaud; Chudik, Alexander; Bussiere, Matthieu (2011)
This paper uncovers the response pattern to global shocks of euro area countries' real effective exchange rates before and after the start of Economic and Monetary Union (EMU), a largely open ended question when the euro was created. We apply to that end a newly developed methodology based on high dimensional VAR theory. This approach features a dominant unit to a large set of over 60 countries' real effective exchange rates and is based on the comparison of two estimated systems: one before and one after EMU. ; We find strong evidence that the pattern of responses depends crucially on the ...
Globalization Institute Working Papers , Paper 102

Working Paper
What Imports to Import Prices?
Martínez García, Enrique; Strackman, Braden (2024-10-25)
This study offers new insights into exchange rate pass-through (ERPT) using U.S. import price indexes by country-of-origin, covering two decades of monthly data. Focusing on the largest U.S. trading partners, our analysis shows that ERPT is more muted than previously estimated, with freight costs having no measurable impact on import prices and foreign production costs exerting only limited influence. We also observe significant heterogeneity in countries’ short-run responses, shaped by differences in trade composition and pricing strategies. Consistent estimates across common dynamic panel ...
Working Papers , Paper 2410

Working Paper
exuber: Recursive Right-Tailed Unit Root Testing with R
http://fedora:8080/fcrepo/rest/objects/authors/; Martinez-Garcia, Enrique; Pavlidis, Efthymios (2020-05-12)
This paper introduces the R package exuber for testing and date-stamping periods of mildly explosive dynamics (exuberance) in time series. The package computes test statistics for the supremum ADF test (SADF) of Phillips, Wu and Yu (2011), the generalized SADF (GSADF) of Phillips, Shi and Yu (2015a,b), and the panel GSADF proposed by Pavlidis, Yusupova, Paya, Peel, Martínez-García, Mack and Grossman (2016); generates finite-sample critical values based on Monte Carlo and bootstrap methods; and implements the corresponding date-stamping procedures. The recursive least-squares algorithm that ...
Globalization Institute Working Papers , Paper 383

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