A common practice in applied econometrics consists of replacing a suspected endogenous variable with its lagged values. This note demonstrates that lagging an endogen¬ous variable does not enable one to escape simultaneity bias. The associated estimates are still inconsistent, and hypothesis...

A common practice in applied economics research consists of replacing a suspected simultaneously-determined explanatory variable with its lagged value. This note demonstrates that this practice does not enable one to avoid simultaneity bias. The associated estimates are still inconsistent, and...

This paper develops a new test, the trinomial test, for pairwise ordinal data samples to improve the power of the sign test by modifying its treatment of zero differences between observations, thereby increasing the use of sample information. Simulations demonstrate the power superiority of the...

Distance-based regression is a prediction method consisting of two steps: from distances between observations we obtain latent variables which, in turn, are the regressors in an ordinary least squares linear model. Distances are computed from actually observed predictors by means of a suitable...

This paper examines power issues for the ADF and four break models (Perron 1989, Zivot and Andrews 1992) when the DGP corresponds to one of the break models. Choosing to test an incorrect break model can but need not greatly reduce the probability of rejecting the null. Break points that are...

If the researcher tests each model in a battery at the a % significance level, the probability that at least one test rejects is generally larger than a %. For five unit-root models, this paper uses Monte Carlo simulation and the inclusion-exclusion principle to show for a %=5% for each test,...

This paper presents unit-root test results for real exchange rates in ten Central and Eastern European transition countries during 1993:01-2003:12. Because of the shift from controlled to market economies and the accompanying crises, failed policy regimes and changes in exchange rate regimes,...

This paper proposes two new unit root tests that are appropriate in the presence of an unknown number of structural breaks. One is based on a single time series and the other is based on a panel of multiple series. For the estimation of the number of breaks and their locations, a simple...

Despite the high volatilities recorded for electricity prices, there seems to be little demand for options on electricity. One reason for the disinterest in electricity options could arise from uncertainty about how to price these options. This study uses recent econometric advances to...

The aim of this letter is to discuss and illustrate what we call (lambda, sigma-2)analysis, which is a method to distinguish between the stability of a stochastic dynamic system and the volatility of a variable generated by this system. It is also emphasized that this method is able to generate...