This note investigates long-run exclusion in a cointegrated vector autoregressive (VAR) model from the viewpoint of …nite-sample statistical inference. Monte Carlo experiments show that, in various circumstances, a mis-speci…ed partial VAR model, which is justi…ed by the existence of a long-run excluded variable, can lead to better …nite-sample inference for cointegrating rank than a fully-spec...

Empirical growth research faces a high degree of model uncertainty. The current paper deals with the fundamental issue of parameter estimation under model uncertainty, and compares the performance of various model averaging techniques. In particular, it contrasts Bayesian model averaging (BMA) — currently one of the standard methods used in growth empirics — with a new method called weighted-av...

The impact of environmental stringency on capital flows remains a hotly contested issue. Moreover, existing parametric estimates using counts of new foreign-owned manufacturing plant births provide counter-intuitive results: pollution abatement costs are only found to have an impact in non-pollution-intensive sectors. Applying recently developed nonparametric count data methods, we re-visit thi...

We draw attention to an apparent puzzle in the aggregate consumption behavior of Singaporeans. In stark contrast to the rest of the world, the average propensity to consume (APC) has plummeted to just two-fifths of national income by the year 2003, leaving the Singapore economy without a dependable built-in stabilizer. This phenomenon represents a notable departure from the stable longrun equil...

We propose a concept of intraday overreaction characterized by intraday price movements which are corrected within the same trading day. It is a concept of relative overreaction in the sense that the price range within a trading day is large in comparison with the openclose return volatility. As a one-sided concept it allows to distinguish between upward and downward overreaction. A test for ov...

Are share markets too volatile? While it is difficult to ignore share market volatility it is important to determine whether volatility is excessive. This paper replicates the Shiller (1981) test as well as applying standard time series analysis to annual Australian stock market data for the period 1883 to 1999. While Shiller’s test suggests the possibility of excess volatility, time series ana...

The forecast combination literature has optimal combination methods, however, empirical studies have shown that the simple average is notoriously di cult to improve upon. This paper introduces a novel way to choose a subset of forecasters who might have specialized knowledge to improve upon the simple average over all forecasters in the SPF. In particular, taking the average of forecasters that...

We propose structural models of investment for the econometric estimation of the real option markup. Count data models offer flexible specifications for bringing real option investment models to aggregate market data. The empirical results for oil tanker investment data are supportive for the proposed structural models, as well as the real option hypothesis. We find that the sensitivity of inve...

Cointegration analysis has led to equilibrium-correction econometric systems being ubiquitous. But in a non-stationary world subject to structural breaks, where model and mechanism differ, equilibrium-correction models are a risky device from which to forecast. Equilibrium shifts entail systematic forecast failure, as forecasts will tend to move in the opposite direction to data. We explain the...

In a Bayesian analysis, different models can be compared on the basis of the expected or marginal likelihood they attain. Many methods have been devised to compute the marginal likelihood, but simplicity is not the strongest point of most methods. At the same time, the precision of methods is often questionable. In this paper several methods are presented in a common framework. The explanation ...