This paper proposes bias-adjusted normal approximation versions of Lagrange multiplier (NLM) test of error cross section independence of Breusch and Pagan (1980) in the case of panel models with strictly exogenous regressors and normal errors. The exact mean and variance of the Lagrange...

This paper proposes simple tests of error cross section dependence which are applicable to a variety of panel data models, including stationary and unit root dynamic heterogeneous panels with short T and large N. The proposed tests are based on average of pair-wise correlation coefficients of...

The paper analyzes whether the political regime of a country inuences its involvement in international trade. Firstly, we develop a theoretical model that predicts that autocracies trade less than democracies. Secondly, we test the predictions of the model empirically using a panel of more than...

Empirical evidence presented in this paper shows that the predictability of inflation at long horizons varies considerably across countries. Both simple theory and empirical evidence suggest that the crucial factor is the extent to which systematic monetary policy succeeds in stabilising the...

Since the early 1990s, substantial resources and effort have been spent on implementing market-oriented electricity reform in developing countries. Important sectoral, economic, and social dimensions are involved in electricity reform, but empirical analysis and evaluation have been of limited...

In models with unobserved taste heterogeneity, distributional assumptions can be placed in two ways: (1) by specifying the distribution of coefficients in the utility function and deriving the distribution of willingness to pay (wtp), or (2) by specifying the distribution of wtp and deriving the...

This paper considers the implications of the permanent/transitory decomposition of shocks for identification of structural models in the general case where the model might contain more than one permanent structural shock. It provides a simple and intuitive generalization of the in.uential work...

Supply Function Equilibria (SFE) offer an attractive equilibrium concept for an electricity Pool in which all suppliers receive the market clearing price and are an important tool for examining market power. It is helpful to have analytical solutions available for simple models to explore market...

In finance theory, the standard deviation of asset returns is almost universally recognised as a measure of risk. This universality continues to exist even in the presence of the known limitations of using the standard deviation and also alternative risk measures. One possible reason for this...