In this paper, we consider a cointegrated panel data model with non-stationary common factors, which, because of its appeal in many economic applications, has received much attention in the recent literature. By deriving a Granger-type representation theorem, we obtain several equivalent model...

Pesaran and Yamagata (Pesaran, M.H., Yamagata, T., Testing slope homogeneity in large panels, Journal of Econometrics 142, 50–93, 2008) propose a test for slope homogeneity in large panels, which has become very popular in the literature. However, the test cannot deal with the practically...

We estimate panel vector autoregressions to analyze the highly disputed relationship between sovereign debt and economic growth. Using data on 20 developed countries, we find no evidence for a robust effect of debt on growth, even for higher levels of debt. We do find a significant negative...

We assess the contribution of national (country-wide) and international data to the task of forecasting the real GDP of Canadian provinces. Using the targeting predictors approach of Bai and Ng (2008) [Bai, J., Ng, S., 2008. Forecasting economic time series using targeted predictors. Journal of...

This paper theoretically explains why bias correction appears in two statistics recently developed by Baltagi et al. (2011, 2012), which are designed to test the sphericity and cross-sectional dependence of the errors in the fixed effects panel model respectively. Our explanation shows that the...

In this note we extend the method proposed in Bun and Carree (2006) to the more general PVARX(1) model and show that the iterative procedure is not consistent for fixed T. Subsequently we provide corrected version of the bias correction procedure which is fixed T consistent and robust to both...

The purpose of this paper is to test the hypothesis first documented by Romer (1993), that inflation is lower in more open economies. According to this hypothesis, central banks have a smaller incentive to engineer surprise inflations in economies that are more open because the Phillips curve is...

We examine finite sample properties of estimators for approximate factor models when N is small. Contrary to the “rule-of-thumb”, we find that the principal component analysis estimator and the quasi-maximum likelihood estimator perform well even when N is small.

This paper develops a simple test à la Pesaran (2007) for the null hypothesis of stationarity in heterogeneous panel data with cross-sectional dependence in the form of a common factor in the disturbance. We also allow for serial correlation.

In an influential paper, Pesaran [Pesaran, M.H. (2006). Estimation and inference in large heterogeneous panels with a multifactor error structure. Econometrica 74, 967–1012] proposes a very simple estimator of factor-augmented regressions that has since then become very popular. In this note...