Similar but alternative specifications of tests of forward rate unbiasedness provide conflicting evidence on the rejection of the hypothesis. These conflicting results are reconciled by demonstrating that although the root cause is simultaneity bias, the severity of this bias and the resulting...

A unit root testing procedure is presented that exploits the well-established power advantages of panel estimation while rectifying a deficiency in other panel unit root tests. This procedure, which takes into account contemporaneous cross-correlation and heterogeneous serial correlation of the...

In this paper we have tested various explanations for differences in rates of economic growth across states. We found no evidence consistent with Olson's hypothesis that differences in state age (a proxy for the strength of special interest groups) can explain differences in state growth....

The crowding out debate fails to incorporate the impact of expansionary policy on interest rates for private sector borrowing through changes in perceived default risk. In a modified IS-LM model with default risk dependent on the state of the economy, government borrowing has an indeterminate...

In this paper, the authors present evidence that neither large differences in inflation nor long time periods are necessary for a finding favorable to purchasing power parity. Evidence from cointegrating regressions and tests of the real exchange rate indicate that purchasing power parity held...

For the three Baltic countries we find foreign interest rates a more important determinant of domestic interest rates than domestic inflation.

Ford et al. (this issue) point out that the SURADF panel unit root test may be sensitive to panel composition. This reply shows that they overstate the case since they focus on a short time series of 44 observations. Type II errors are much more likely in this environment so that inconsistent...