I Just Ran Four Million Regressions

In this paper I try to move away from the Extreme Bounds method of identifying" Instead of analyzing the" extreme bounds of the estimates of the coefficient of a particular variable distribution. My claim in this paper is that, if we do this, the picture emerging from the" empirical growth literature is not the pessimistic Robust" that we get with the" extreme bound analysis. Instead, we find that a substantial number of variables can be found" to be strongly related to growth.

Military spending and economic growth in China: a regime-switching analysis

This article has been made available through the Brunel Open Access Publishing Fund.This article investigates the impact of military spending changes on economic growth in China over the period 1953 to 2010. Using two-state Markov-switching specifications, the results suggest that the relationship between military spending changes and economic growth is state dependent. Specifically, the results show that military spending changes affect the economic growth negatively during a slower growth-higher variance state, while positively within a faster growth-lower variance one. It is also demonstrated that military spending changes contain information about the growth transition probabilities. As a policy tool, the results indicate that increases in military spending can be detrimental to growth during slower growth-higher growth volatility periods. © 2014 © 2014 The Author(s). Published by Taylor & Francis

Re-examining the consumption-wealth relationship : the role of model uncertainty

This paper discusses the consumption-wealth relationship. Following the recent influential workof Lettau and Ludvigson [e.g. Lettau and Ludvigson (2001), (2004)], we use data on consumption, assets andlabor income and a vector error correction framework. Key …ndings of their work are that consumption doesrespond to permanent changes in wealth in the expected manner, but that most changes in wealth are transitoryand have no e¤ect on consumption. We investigate the robustness of these results to model uncertainty andargue for the use of Bayesian model averaging. We …nd that there is model uncertainty with regards to thenumber of cointegrating vectors, the form of deterministic components, lag length and whether the cointegratingresiduals a¤ect consumption and income directly. Whether this uncertainty has important empirical implicationsdepends on the researcher's attitude towards the economic theory used by Lettau and Ludvigson. If we workwith their model, our findings are very similar to theirs. However, if we work with a broader set of models andlet the data speak, we obtain somewhat di¤erent results. In the latter case, we …nd that the exact magnitudeof the role of permanent shocks is hard to estimate precisely. Thus, although some support exists for the viewthat their role is small, we cannot rule out the possibility that they have a substantive role to play

Variable selection and estimation in high‐dimensional models

Models with high-dimensional covariates arise frequently in economics and other fields. Often, only a few covariates have important effects on the dependent variable. When this happens, the model is said to be sparse. In applications, however, it is not known which covariates are important and which are not. This paper reviews methods for discriminating between important and unimportant covariates with particular attention given to methods that discriminate correctly with probability approaching 1 as the sample size increases. Methods are available for a wide variety of linear, nonlinear, semiparametric, and nonparametric models. The performance of some of these methods in finite samples is illustrated through Monte Carlo simulations and an empirical example

Fiscal composition and long-term growth

We assess the fiscal composition–growth nexus, using a large country panel, accounting for the usually encountered econometric pitfalls. Our results show that revenues have no significant impact on growth whereas expenditures have negative effects. The same is true for the OECD with the addition that government revenue has a negative impact on growth. From our results, taxes on income are less for growth enhancing, as well as public wages, interest payments, subsidies and government consumption, while spending on education and health boosts growth.info:eu-repo/semantics/publishedVersio

Universal features in the growth dynamics of complex organizations

We analyze the fluctuations in the gross domestic product (GDP) of 152 countries for the period 1950--1992. We find that (i) the distribution of annual growth rates for countries of a given GDP decays with ``fatter'' tails than for a Gaussian, and (ii) the width of the distribution scales as a power law of GDP with a scaling exponent $\beta \approx 0.15$. Both findings are in surprising agreement with results on firm growth. These results are consistent with the hypothesis that the evolution of organizations with complex structure is governed by similar growth mechanisms.Comment: 4 pages, 7 ps figures, using Latex2e with epsf rotate and multicol style files. Submitted to PR

High Dimensional Sparse Econometric Models: An Introduction

In this chapter we discuss conceptually high dimensional sparse econometric models as well as estimation of these models using L1-penalization and post-L1-penalization methods. Focusing on linear and nonparametric regression frameworks, we discuss various econometric examples, present basic theoretical results, and illustrate the concepts and methods with Monte Carlo simulations and an empirical application. In the application, we examine and confirm the empirical validity of the Solow-Swan model for international economic growth