This paper argues that typical applications of panel unit root tests should take possible nonstationarity in the volatility process of the innovations of the panel time series into account. Nonstationarity volatility arises for instance when there are structural breaks in the innovation...

This paper argues that typical applications of panel unit root tests should take possible nonstationarity in the volatility process of the innovations of the panel time series into account. Nonstationarity volatility arises for instance when there are structural breaks in the innovation...

This paper takes a panel cointegration approach to the estimation of short- and long-run exchange rate pass-through (ERPT) to import prices in the European countries. Although economic theory suggests a long-run relationship between import prices and exchange rate, in recent empirical studies...

The purpose of this paper is to investigate the stochastic behavior of corporate debt ratios utilizing a balanced panel of 2,556 publicly traded US firms during the period 1997 - 2010. We partition the panel into ten economic sectors and perform panel unit root tests on each sector employing...

Inflation differentials in the Euro area are mainly due to a sustained divergence of wage developments across the Euro area, and narrower differences in labour productivity growth (Alvarez et al., 2006). We investigate convergence of inflation using unit labour cost (ULC) growth and applying...

We follow the behavioral equilibrium exchange rate approach by Clark and MacDonald (1998) to derive equilibrium real effective exchange rates and currency misalignments for the US and its 16 major trading partners. We apply cointegration and panel cointegration techniques to derive fully...

This paper examines the sources of stickiness in aggregate consumption growth. We first derive a dynamic consumption equation which encompasses many recent developments in consumption theory: habit formation, intertemporal substitution effects, consumption based on current income, and...

In this paper, we extend Henning Bohn's (2008) fiscal sustainability test by allowing for slope heterogeneity and cross-sectional dependence (CD). In particular, our econometric approach is the first that allows fiscal reaction functions (FRF) to capture unobserved heterogeneous effects from...

In this paper, we extend Henning Bohn's (2008) fiscal sustainability test by allowing for slope heterogeneity and cross-sectional dependence (CD). In particular, our econometric approach is the first that allows fiscal reaction functions (FRF) to capture unobserved heterogeneous effects from...