Statistical tests and estimators of the rank of a matrix and their applications in econometric modelling

Testing and estimating the rank of a matrix of estimated parameters is key in a large variety of econometric modelling scenarios. This paper describes general methods to test for and estimate the rank of a matrix, and provides details on a variety of modelling scenarios in the econometrics literature where such methods are required. Four different methods to test the true rank of a general matrix are described, as well as one method that can handle the case of a matrix subject to parameter constraints associated with defineteness structures. The technical requirements for the implementation of the tests of rank of a general matrix differ and hence there are merits to all of them that justify their use in applied work. Nonetheless, we review available evidence of their small sample properties in the context of different modelling scenarios where all, or some, are applicable. JEL Classification: C12, C15, C32model specification, Multiple time series, tests of rank

Spanish Regional Unemployment Revisited: The Role of Capital Accumulation

This paper provides new evidence for the evolution of regional unemployment rates in Spain over the 1980-2000 period. We argue that interactive dynamic systems of labour demand, wage setting, and labour force equations (i) allow for a richer interpretation of regional disparities, and (ii) can capture the unemployment effects of growing variables such as capital stock. After classifying the 17 Spanish regions into high and low unemployment groups using kernel and cluster techniques, we estimate a structural labour market model for each group and evaluate the unemployment contributions of investment, benefits, taxes, and the oil price. We find that the main driving force of regional unemployment swings is capital accumulation.Regional unemployment, Disparities, Capital accummulation, Kernel, Cluster

Measuring and Analyzing the Liquidity of the Italian Treasury Security Wholesale Secondary Market

Although its importance, only recently the issue of liquidity in Treasury markets has received greater attention. We survey the literature about market liquidity and liquidity measures, and we put forward new measures. The aim is to provide a description of the liquidity of the Italian wholesale secondary market, which we describe thoroughly. We apply a large set of measures on a unique dataset, which gives us a complete view of the market. Even though the market provides an amount of liquidity that fits the market needs, the quality of the order book is low, and despite the presence of a large number of market makers, the degree of competition among them is not very high. Moreover, no clear and general relationship emerges between trading and order book measures. Indeed, even though trading activity is higher for on-the-run securities with respect to the off-the-run securities, there is not a sharp difference in terms of liquidity of the order book between them. In this case market regulation plays an important role. Finally, we investigate how long it takes for a new issue to become the benchmark for its segment. Our evidence shows that some modifications of the issuance policy in order to have a larger outstanding since the first auction could help securities in gaining earlier their benchmark status, especially in case of 10-year BTPs.Liquidity, liquidity measures, Government securities, market microstructure, benchmark status.