We examine the time path of foreign direct and portfolio investment in developing countries to test if shocks have permanent or temporary effects. Our findings indicate that shock effects are ...temporary. The results are robust to the strictness of balance of payment controls.
Using three recent panel unit root methodologies, we strongly reject the unit root hypothesis for real per capita income for the 48 contiguous states from 1929 to 1995. The rate of convergence is ...sensitive to assumptions of the heterogeneity of the intercept, first order autoregressive coefficients, lag length and accommodating for a trend break after the 1973 oil shock.
This paper deals with cross section dependence, homogeneity restrictions and small sample bias issues in dynamic panel regressions. To address the bias problem we develop a panel approach to median ...unbiased estimation that takes account of cross section dependence. The estimators given here considerably reduce the effects of bias and gain precision from estimating cross section error correlation. This paper also develops an asymptotic theory for tests of coefficient homogeneity under cross section dependence, and proposes a modified Hausman test to test for the presence of homogeneous unit roots. An orthogonalization procedure, based on iterated method of moments estimation, is developed to remove cross section dependence and permit the use of conventional and meta unit root tests with panel data. Some simulations investigating the finite sample performance of the estimation and test procedures are reported.
This study examines the pricing behavior of Canadian and U.S. agri-food exporters consistent with a model that permits the identification of pricing to market (PTM) behavior and imperfect market ...competition in agri-food markets. The estimation strategy takes advantage of recently developed panel unit root tests to determine the time-series properties of the data and avoid the problem associated with lower power conventional unit root tests. Among U.S. products, the conventional PTM model indicated evidence of a greater degree of imperfect competition in international markets for U.S. wheat. While price discrimination and market segmentation are apparent for Canadian exports in selected markets, the export adjustment pattern in most cases tended to exacerbate the effect of exchange rate fluctuations on foreign currency prices of Canadian products.
In this paper alternative approaches for testing the unit root hypothesis in panel data are considered. First, a robust version of the Dickey-Fuller t-statistic under contemporaneous correlated ...errors is suggested. Second, the GLS t-statistic is considered, which is based on the t-statistic of the transformed model. The asymptotic power of both tests against a sequence of local alternatives is compared. To adjust for short-run serial correlation of the errors, a pre-whitening procedure is suggested that yields a test statistic with a standard normal limiting distribution as N and T tends to infinity. The test procedure is further generalized to accommodate individual specific intercepts. From our Monte Carlo simulations it turns out that the robust OLS t-statistic performs well with respect to size and power, whereas the the GLS t-statistic may suffer from severe size distortions in small and moderate sample sizes. To improve the small sample properties of the GLS test procedure, a bootstrap version of the test is available.
This paper studies subsampling hypothesis tests for panel data that are possibly nonstationary, and cross-sectionally correlated and cross-sectionally cointegrated. The tests include panel unit root ...and cointegration tests as special cases. The number of cross-sectional units in the panel data is assumed to be finite, and that of time series observations infinite. Cross-sectional correlation is allowed for both regressors and error terms. Two types of subsampling, non-centered and centered, are considered. It is shown that empirical distributions using subsamples uniformly converge to corresponding limiting distributions. For the non-centered subsampling, the result is shown in the mode of almost sure convergence and discontinuous limiting distributions are allowed. For the centered subsampling, the uniform convergence result is obtained in the mode of convergence in probability and only for continuous limiting distributions. Test consistency using the critical values from the empirical distributions is also established. These results are applied to panel unit root and stationarity tests. The panel unit root tests considered are Levin, Lin and Chu (2002)'s t-test, Im, Pesaran and Shin's (2003) averaged t-test and Choi's (2001) Z test. For the null of stationarity, Hadri's (2000) test is used. Block sizes of subsamples are chosen by stochastic calibration. Simulation results show that the subsampling distributions of the panel unit root tests using the stochastic calibration provide reasonably good approximations to the finite sample distributions of the tests.
An import demand model, augmented with third-country effect variables, is developed to examine the effects of strong U.S. dollar, volatility of the U.S. dollar, and competition among the exporting ...countries on the shares of U.S. wheat in Asian markets. In the empirical model, the dependent variable is the market shares of U.S. wheat. Explanatory variables include wheat prices of exporting countries, exchange rates between the importing and exporting countries, and volatilities of the exchange rates. Panel estimation results show that the U.S. currency value and volatility, Australian wheat price, and the volatilities of Canadian and Australian currency values have significant effects on U.S. market shares.
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