This paper proposes a new panel model of cross-sectional dependence. The model has a number of potential structural interpretations that relate to economic phenomena such as herding in financial markets. On an econometric level it provides a flexible approach to the modelling of interactions...

This paper investigates GLS detrending procedures for unit root tests against nonlinear stationary alternative hypotheses where deterministic components are assumed present in the series under investigation. It is found that the proposed procedures have considerable power gains in a majority of...

In this paper we propose a new testing procedure to detect the presence of a cointegrating relationship that follows a globally stationary smooth transition autoregressive (STAR) process. We start from a general VAR model, embed the STAR error correction mechanism (ECM) and then derive the...

This paper proposes a simple direct testing procedure to distinguish a linear unit root process from a globally stationary three-regime self-exciting threshold autoregressive process. We derive the asymptotic null distribution of the Wald statistic, and show that it does not depend on unknown...

Interest in the interface of nonstationarity and nonlinearity has been increasing in the econometric literature. This paper provides a formal method of testing for nonstationary long memory against the alternative of particular forms of nonlinerarity. The nonlinear models we consider are ESTAR...

Given the growing availability of large datasets and following recent research trends on multi-dimensional modelling, we develop three dimensional (3D) panel data models with hierarchical error components that allow for strong cross-sectional dependence through unobserved heterogeneous global...

A large strand of the literature on panel data models has focused on explicitly modelling the cross-section dependence between panel units. Factor augmented approaches have been proposed to deal with this issue. Under a mild restriction on the correlation of the factor loadings, we show that...