Noting that many economic variables display occasional shifts in their second order moments, we investigate the performance of homogenous panel unit root tests in the presence of permanent volatility shifts. It is shown that in this case, panel unit root tests derived under time invariant...

We introduce a new, factor based bootstrap approach which is robust under heteroskedastic error terms for inference in functional coefficient models. Modeling the functional coefficient parametrically, the bootstrap approximation of an F statistic is shown to hold asymptotically. In simulation...

What does the saving-investment (SI) relation really measure and how should the (SI) relation be measured? These are two of the most discussed issues triggered by the so called Feldstein-Horioka puzzle. Based on panel data we introduce a new variant of functional coefficient models that allow to...

In this paper we follow an empirical approach to examine the implications of the Fisher hypothesis, namely cointegration linking interest rates and inflation, and stationarity of the real interest rate implying in turn homogeneity of the potential equilibrium relation. The considered sample is...

A novel simulation based approach to unit root testing is proposed in this paper. The test is constructed from the distinct orders in probability of the OLS parameter estimates obtained from a spurious and an unbalanced regression, respectively. While the parameter estimate from a regression of...

This chapter reviews recent research adopting methods from statistical physics in theoretical or empirical work in economics and finance. The bulk of what has recently become known as 'econophysics' in broader circles draws its motivation from observed scaling laws in financial markets and the...

In this paper, we consider daily financial data of a collection of different stock market indices, exchange rates, and interest rates, and we analyze their multi-scaling properties by estimating a simple specification of the Markov- switching multifractal model (MSM). In order to see how well...

In panel data econometrics the Hausman test is of central importance to select an e±cient estimator of the models' slope parameters. When testing the null hypothesis of no correlation between unobserved heterogeneity and observable explanatory variables by means of the Hausman test model...

We consider the problem of ex-ante forecasting conditional correlation patterns using ultra high frequency data. Flexible semiparametric predictors referring to the class of dynamic panel and dynamic factor models are adopted for daily forecasts. The parsimonious set up of our approach allows to...