In recent years it has become apparent that we must take unobservable heterogeneity into account when conducting empirical consumer demand analysis. This paper is concerned with integrability (that is, whether demand is consistent with utility maximization) of the conditional mean demand (that...

All micro studies of demand are based on using time series cross sectional data. Because in such data each household is only observed once, it is only under strong identifying restrictions that one can interpret the coefficients on consumer behavior. For example, if tastes are correlated with...

I consider a panel vector-autoregressive model with cross-sectional dependence of the disturbances characterized by a spatial autoregressive process. I propose a three-step estimation procedure. Its first step is an instrumental variable estimation that ignores the spatial correlation. In the...

As of today, estimating interest rate reaction functions for the Euro Area is hampered by the short time span since the conduct of a single monetary policy. In this paper we circumvent the common use of aggregated data before 1999 by estimating interest rate reaction functions based on a panel...

The Balassa-Samuelson effect is usually seen as the prime explanation of the continuous real appreciation of central and east European (CEE) transition countries' currencies against their western counterparts. The response of a small country's real exchange rate to various shocks is derived in a...

This paper proposes a new framework for studying the effects of monetary policy on business investment. Important ambiguities with the modeling of investment dynamics and interactions between real and financial decisions suggest modeling investment spending as a VAR. Based on a panel of...

Panel unit root tests of real exchange rates - as opposed to univariate tests - usually reject non-stationarity. These tests, however, could be biased if the real exchange rate contained MA roots. Indeed, two independent arguments claim that the real exchange rate, being a sum of a stationary...

This paper gives a brief survey of forecasting with panel data. Starting with a simple error component regression and surveying best linear unbiased prediction under various assumptions of the disturbance term. This includes various ARMA models as well as spatial autoregressive models. The paper...

The low capital mobility among OECD countries, signalled by a high saving-investment (SI) relation and known as the Feldstein-Horioka puzzle, has triggered a lively discussion in the empirical literature. In this paper, we compare between, pooled, time and country dependent specifications of the...

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...