Bootstrap inference on Fully Modified Estimates of Cointegrating Coefficients: A Comment

A bootstrap algorithm proposed by Psaradakis (2001) for hypothesis testing in I(1) regressions is discussed and shown to be valid only under the null hypothesis. A simple correction making the procedure valid under both the null and the alternative hypothesis is proposed.

Bootstrapping and Bartlett corrections in the cointegrated VAR model

The small sample properties of tests on long-run coefficients in cointegrated systems are still a matter of concern to applied econometricians. We compare the performance of the Bartlett correction, the bootstrap and the fast double bootstrap for tests on cointegration parameters in the maximum likelihood framework. We show by means of a theorical result and simulations that all three procedures should be based on the unrestricted estimate of the cointegration vectors. The fast double bootstrap delivers superior size correction, whereas the Bartlett correction leads to the least loss of power. However all three perform much better than the asymptotic tests and difference between them are small.

Testing economic geography: Italy, 1951-1991

A rural country in the 1950's, Italy is now a large industrial economy. In this paper we show through a joint analysis of spatial autocorrelation and concentration of employment that this development has not been driven by centre-periphery mechanisms.

A Panel Cointegration study of the long-run relationship between Savings and Investments in the OECD economies, 1970-2007

In this paper we test for the existence of a long-run savings-investments relationship in 18 OECD economies over the period 1970-2007. Although individual modelling provides only very weak support to the hypothesis of a link between savings and investments, this cannot be ruled out as individual time series tests may have low power. We thus construct a new bootstrap test for panel cointegration robust to short- and long-run dependence across units. Thid test provides evidence of a long-run savings-investments relationship in about half of the OECD economies examined. The elasticities are however often smaller than 1, the value expected under no capital movements.Savings, Investments, Feldstein-Horioka puzzle, OECD, Panel Cointegration, Stationary Bootstrap.

The long-term decline of internal migration in Canada – Ontario as a case study

Migration between the Canadian provinces generally followed a declining trend over the period 1971-2004. In this paper, taking Ontario a case study, we seek to explain these patterns using recent panel cointegration methods that are robust to cross-section dependence. Estimation of heterogenous models suggests that the determinants of migration vary across provinces. Overall, unemployment differential and income in the sending province appear to be the most important ones, with income and federal transfer differentials playing only a minor role.Internal migration; panel cointegration; bootstrap; Canada

The long-run relationship between savings and investment in oil-exporting developing countries: A case study of the Gulf Arab States

The relationship between national saving and investment over the long term is examined for six Gulf Arab oil-exporting developing countries -- Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. We show that, provided some large outliers are properly accounted for, long-run equilibrium relationships between saving and investment (both total and fixed) exist in these countries. Since these countries have typically large current account surpluses such relationships cannot be explained by standard arguments. Our hypothesis is that the response of investment to saving largely depends on domestic absorptive capacity.Saving-investment correlation; oil-exporting developing countries; GCC countries; absorptive capacity; outlier detection; integrated process.

A residual-based bootstrap test for panel cointegration

We address the issue of panel cointegration testing in dependent panels, showing by simulations that tests based on the stationary bootstrap deliver good size and power performances even with small time and cross-section sample sizes and allowing for a break at a known date. They can thus be an empirically important alternative to asymptotic methods based on the estimation of common factors. Potential extensions include test for cointegration allowing for a break in the cointegrating coefficients at an unknown date.Panel Cointegration, Stationary Bootstrap, Commmon Factors.

Testing for breaks in cointegrated panels

Stability tests for cointegrating coefficients are known to have very low power with small to medium sample sizes. In this paper we propose to solve this problem by extending the tests to dependent cointegrated panels through the stationary bootstrap. Simulation evidence shows that the proposed panel tests improve considerably on asymptotic tests applied to individual series. As an empirical illustration we examined investment and saving for a panel of 14 European countries over the 1960-2002 period. While the individual stability tests, contrary to expectations and graphical evidence, in almost all cases do not reject the null of stability, the bootstrap panel tests lead to the more plausible conclusion that the long-run relationship between these two variables is likely to have undergone a break.Panel cointegration; stationary bootstrap; parameter stability tests

Models of labour demand with fixed costs of adjustment: a generalised tobit approach

Traditional models of factor demand rely upon convex and symmetric adjustment costs: however, the fortune of this highly restrictive model is due more to analytical convenience than to actual empirical relevance. In this note we first examine the model of employment adjustment under the more realistic hypothesis of fixed costs, show that it can be cast in the form of a Double Censored Random Effect Tobit Model, derive its likelihood function, and finally evaluate the empirical performance of the ML estimators through a Monte Carlo experiment. The performances, although strongly dependent on the degree of censoring, appear promising.

Do Foreigners Replace Native Immigrants? Evidence from a Panel Cointegration Analysis

This paper examines the impact of the immigration of foreigners on domestic labour mobility. Since David Card's seminal study on the regional labour market impact of the Mariel Boatlift it is controversial whether domestic labour mobility equilibrates economic conditions across cities and regions. However, there is little or no evidence that natives leave destinations where migrants tend to cluster. In this paper we reconcile the existing evidence by taking another route. We analyze whether the immigration of foreigners replaces domestic mobility from poor to rich regions. We focus on Italy, which is characterized by market differences in earnings between the North and the South. Based on a panel cointegration approach we exploit the variance of international and internal migration over time for identifying potential displacement effects. The main finding is that, conditional on unemployment and wage differentials, the share of foreign workers in the labour force of the destination regions discourages internal labour mobility significantly. As a consequence, spatial correlation studies which use the variance of the foreigner share across region for identifying the wage and employment effects of immigration, tend to understate the actual immigration impact.international migration, domestic migration, labour markets, panel cointegration, Italy