Hidden panel cointegration

This article extends the seminal work of Granger and Yoo (2002) on hidden cointegration to panel data analysis. It shows how cumulative negative and positive changes can be constructed for each panel variable. It also shows how tests similar to the augmented Dickey-Fuller tests can be implemented to find out whether the cointegration is hidden in the panel or not. An application is provided to investigate the impact of permanent positive and negative shocks in the government expenditure on the national output in a panel of three countries.Asymmetry, Panel Data, Cointegration, Testing, Government Spending, Output

Asymmetric generalized impulse responses and variance decompositions with an application

This paper introduces asymmetric impulse response functions and asymmetric variance decompositions. It is shown how the underlying variables can be transformed into cumulative positive and negative changes in order to estimate the impulses to an asymmetric innovation. An application is provided to demonstrate how the propagation mechanism of these asymmetric impulses and responses operates.VAR modelling, Asymmetric Impulses, Fiscal Policy

FOREIGN AID AND ECONOMIC GROWTH: NEW EVIDENCE FROM PANEL COINTEGRATION

The relationship between foreign aid and economic growth is investigated for a panel of developing countries (Botswana, Ethiopia, India, Kenya, Sri-Lanka, and Tanzania) over the period 1974-1996. The results reveal that the variables contain a panel unit root and they cointegrate in a panel perspective. The long-run elasticities (close to one for most countries) show that foreign aid has a positive and significant effect on economic activity for each country in the sample. A policy implication which may be drawn from the study is that foreign capital flows can have a favorable effect on real income by supplementing domestic savings.Foreign Aid, Economic Growth, Panel Unit Root Tests, Panel Cointegration, Africa, Asia