Automobile gasoline demand can be expressed as a multiplicative function of fuel efficiency, mileage per car and car ownership. This implies a linear relationship between the price elasticity of total fuel demand and the price elasticities of fuel efficiency, mileage per car and car ownership....

We show that the Anderson-Rubin (AR) statistic is the sum of two independent piv-otal statistics. One statistic is a score statistic that tests location and the other statistictests misspecification. The chi-squared distribution of the location statistic has a degreesof freedom parameter that is...

Several lessons learned from a Bayesian analysis of basic economic time series models by means of the Gibbs sampling algorithm are presented. Models include the Cochrane-Orcutt model for serial correlation, the Koyck distributed lag model, the Unit Root model, the Instrumental Variables model...

A Direct Monte Carlo (DMC) approach is introduced for posterior simulation in theInstrumental Variables (IV) model with one possibly endogenous regressor, multipleinstruments and Gaussian errors under a flat prior. This DMC method can also beapplied in an IV model (with one or multiple...

This discussion paper led to a publication in <A href="http://www.sciencedirect.com/science/article/pii/S0167947306003446">'Computational Statistics & Data Analysis'</A> 51(7) 3296-318.<p>In practice structural equations are often estimated by least-squares, thus neglecting any simultaneity. This paper reveals why this may often be justifiable and when. Assuming data...</p></a>

We propose a novel statistic to test the rank of a matrix. The rank statistic overcomes deficiencies of existing rank statistics, like: a Kronecker covariance matrix for the canonical correlation rank statistic of Anderson [Annals of Mathematical Statistics (1951), 22, 327–351] sensitivity to...

It is well established that the shocks driving many key macro-economic and financial variables display time-varying volatility. In this paper we consider estimation and hypothesis testing on the coefficients of the co-integrating relations and the adjustment coefficients in vector...

Factor construction methods are widely used to summarize a large panel of variables by means of a relatively small number of representative factors. We propose a novel factor construction procedure that enjoys the properties of robustness to outliers and of sparsity; that is, having relatively...

This paper uses the market-standard Gaussian copula model to show that fair spreads on CDO tranches are much higher than fair spreads on similarly-rated corporate bonds. It implies that credit ratings are not sufficient for pricing, which is surprising given their central role in structured...

Patton and Timmermann (2012, 'Forecast Rationality Tests Based on Multi-Horizon Bounds', <I>Journal of Business & Economic Statistics</I>, 30(1) 1-17) propose a set of useful tests for forecast rationality or optimality under squared error loss, including an easily implemented test based on a...</i>