In this study we investigate the long run relationship between dividends and corporate valuation with the use of panel unit root tests and panel cointegration analysis. The long run relationship is ...estimated using fully modified OLS for a panel consisting of 479 firms listed on the London Stock Exchange over the time period 1984-2007. The empirical results provide clear support for the hypothesis that there is a single equilibrium relation between market value, book value, earnings and dividends, and that dividends have a positive impact on corporate valuation.
The paper investigates the law of one price (LOP), using 84 Canada/U.S. manufacturing prices over 1961–1996. We find that while there is a long-run relationship between Canadian and U.S. prices, ...industries vary in terms of adherence to the LOP. In industries with higher degree of market competition and integration, the correlation between Canadian and U.S. prices becomes stronger.
This paper examines how the Swedish imports prices react to exchange ratechanges in the long run. It finds, through non-stationary panel analysis, thatthe Swedish import prices (for the majority of ...industries) change but not inproportion to exchange rate changes. The evidence from panel cointegrationalso shows that pricing behavior of the Swedish imports varies across industriesand such variations could be related to industry-specific characteristics.
Cross-country estimations of the Environmental Kuznets Curve (EKC) to empirically analyze the relationship between income and pollution have generally assumed a common structure for all countries. ...Since this latter feature is not supported by economic theory, this paper uses the Random Coefficient Model proposed by Swamy (1970) and empirically estimates EKCs for sulfur dioxide with specific turning points from a sample of 73 high and low income countries. A crucial aspect is that there are large differences between the estimated turning points of the EKCs for the different countries in the sample, which points to the relevance of using the approach employed here since assuming a common structure for all countries erroneously hides this relevant empirical feature. Moreover, the analysis of the structure of the EKCs estimated suggests that regulatory processes resembling market mechanisms could induce the empirical emergence of EKCs. Finally, taking into consideration the most recent concerns in the literature, we econometrically checked, on the one hand, for the validity of the usual theoretical assumption of exogeneity of the per capita income variable in the EKC relationship and, on the other hand, for an eventual structural change causing the sign change in the pollution-per capita income relationship of the EKC. The weak exogeneity and the structural break test employed rendered plausible that income per capita is really the driver variable determining the EKC relationship found.
We examine the validity of real interest parity as a long run condition for the G7 countries. If real interest parity holds, differences of real interest rates are stationary. This is investigated by ...the means of conventional and panel unit root tests, where heterogeneity and contemporaneous correlation across the panel members is taken into account. Performing ADF- and KPSS-style panel tests on ex post rates, the evidence suggests a mixture of stationary and nonstationary series. However strong linkages between individual real interest rates can be found in the European economies.
We find strong econometric support for a break in the relationship between perceived and HICP inflation in the euro area, triggered by the introduction of euro notes and coins in January 2002. The ...break is fairly homogeneous across individuals with different socio-economic characteristics. We found no support for the thesis according to which perceptions are systematically formed by frequently purchased products. A similar break is found when national CPIs instead of HICPs are used as benchmarks. The role of the non-inclusion of owner-occupied housing in the HICP was negligible. Therefore the credibility of the HICP per se is not at stake.
We investigate hysteresis and persistence behaviour in the course of unemployment in EU countries and US states by means of first and second generation panel unit root tests. While the former tests ...assume independent cross sections, the latter control for dependencies. The first generation tests indicate, that unemployment is persistent, but nevertheless stationary. Second generation tests reveal mixed results, but the evidence for stationarity is much stronger for the US. Hysteresis in EU unemployment is attributed to the idiosyncratic, but not to the common component. In contrast, idiosyncratic components are stationary in the US. If hysteresis behaviour is also relevant here, it is more likely to arise in the common component. These findings might reflect a lower degree of migration of the unemployed in the EU from starving into prosperous regions, possibly because of language barriers or national labour market regulations
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