Tests of parameter instabilities are likely to have low power when change-points occur towards the end of the sample. This paper considers various modifications of existing tests and introduces new statistics designed to have high power in such circumstances. The properties of both Wald-type...

This paper considers the problem of testing against stochastic trend and seasonality in the presence of structural breaks and unit roots at frequencies other than those directly under test, which we term unattended breaks and unattended unit roots respectively. We show that under unattended...

The paper considers likelihood ratio (LR) tests of stationarity, common trends and cointegration for multivariate time series. As the distribution of these tests is not known, a bootstrap version is proposed via a state space representation. The bootstrap samples are obtained from the Kalman...

Unit roots in output, an exponential 2 per cent rate of convergence and no change in the underlying dynamics of output seem to be three stylized facts that cannot go together. This paper extends the Solow-Swan growth model allowing for cross-sectional heterogeneity. In this framework, aggregate...

For a class of long memory volatility models, we establish the asymptotic distribution theory of the Gaussian estimator and the Lagrange multiplier test. Both the case of estimation of martingale difference and ARMA levels are considered. A Montecarlo exercise is presented to assess the small...

Cointegration analysis tests for the existence of a significant long-run equilibrium among some economic variables. Standard econometric procedures to test for cointegration have proven unreliable when the long-run relation among the variables is characterized by non-linearities and persistent...

We look at business survey data on Italian internationalized firms’ characteristics and performances since the outbreak of the 2008 crisis until 2012. Among Italian firms with 20 employees or more, an increasing share (from 7.1 to 13.2% between 2006 and 2011) owns a foreign productive unit....

This paper considers the problem of testing for the presence of stochastic trends in multivariate time series with structural breaks. The breakpoints are assumed to be known. The testing framework is the multivariate Locally Best Invariant test and the common trend test of Nyblom and Harvey.

The paper considers tests of seasonal integration and cointegration for multivariate time series. The locally best invariant (LBI) test of the null hypothesis of a deterministic seasonal pattern against the alternative of seasonal integration is derived for a model with Gaussian i.i.d....

Large and growing international financial linkages between East and West have altered the nature of the stability risks faced by European banking systems, increasing susceptibility to contagion. This paper aims to identify potential risks of cross-border contagion using a sample of large Western...