Search Results
Working Paper
COVID-19 Fiscal Support and Its Effectiveness
This paper uses a threshold-augmented Global VAR model to quantify the macroeconomic effects of countries’ discretionary fiscal actions in response to the Covid-19 pandemic and its fallout. Our results are threefold: (1) fiscal policy is playing a key role in mitigating the effects of the pandemic; (2) all else equal, countries that implemented larger fiscal support are expected to experience less output contractions; (3) emerging markets are also benefiting from the synchronized fiscal actions globally through the spillover channel and reduced financial market volatility.
Working Paper
Long-run effects in large heterogenous panel data models with cross-sectionally correlated errors
This paper develops a cross-sectionally augmented distributed lag (CS-DL) approach to the estimation of long-run effects in large dynamic heterogeneous panel data models with cross-sectionally dependent errors. The asymptotic distribution of the CS-DL estimator is derived under coefficient heterogeneity in the case where the time dimension (T) and the crosssection dimension (N) are both large. The CS-DL approach is compared with more standard panel data estimators that are based on autoregressive distributed lag (ARDL) specifications. It is shown that unlike the ARDL type estimator, the CS-DL ...
Working Paper
Aggregation in large dynamic panels
This paper investigates the problem of aggregation in the case of large linear dynamic panels, where each micro unit is potentially related to all other micro units, and where micro innovations are allowed to be cross sectionally dependent. Following Pesaran (2003), an optimal aggregate function is derived and used (i) to establish conditions under which Granger's (1980) conjecture regarding the long memory properties of aggregate variables from "a very large scale dynamic, econometric model" holds, and (ii) to show which distributional features of micro parameters can be identified from ...
Working Paper
The Heterogeneous Effects of Global and National Business Cycles on Employment in U.S. States and Metropolitan Areas
The growth of globalization in recent decades has increased the importance of external factors as drivers of the business cycle in many countries. Globalization affects countries not just at the macro level but at the level of states and metro areas as well. This paper isolates the relative importance of global, national and region-specific shocks as drivers of the business cycle in individual U.S. states and metro areas. We document significant heterogeneity in the sensitivity of states and metro areas to global shocks, and show that direct trade linkages are not the only channel through ...
Working Paper
Big data analytics: a new perspective
Model specification and selection are recurring themes in econometric analysis. Both topics become considerably more complicated in the case of large-dimensional data sets where the set of specification possibilities can become quite large. In the context of linear regression models, penalised regression has become the de facto benchmark technique used to trade off parsimony and fit when the number of possible covariates is large, often much larger than the number of available observations. However, issues such as the choice of a penalty function and tuning parameters associated with the use ...
Working Paper
Pooled Bewley Estimator of Long-Run Relationships in Dynamic Heterogenous Panels
Using a transformation of the autoregressive distributed lag model due to Bewley, a novel pooled Bewley (PB) estimator of long-run coefficients for dynamic panels with heterogeneous short-run dynamics is proposed. The PB estimator is directly comparable to the widely used Pooled Mean Group (PMG) estimator, and is shown to be consistent and asymptotically normal. Monte Carlo simulations show good small sample performance of PB compared to the existing estimators in the literature, namely PMG, panel dynamic OLS (PDOLS) and panel fully-modified OLS (FMOLS). Application of two bias-correction ...
Discussion Paper
How the global perspective can help us identify structural shocks
This paper argues that global perspective can help us with the identification of structural shocks by utilizing the information on the signs of the responses of individual countries (cross section units). We demonstrate the main idea by means of Monte Carlo experiments and present an empirical application where we look at the effects of oil supply shocks on output and on global exchange rate constellation. Using a large-scale GVAR model of oil prices and the global economy, we find supply shocks tend to have a stronger impact on emerging economies' real output as compared with mature ...
Working Paper
Social Distancing, Vaccination and Evolution of COVID-19 Transmission Rates in Europe
This paper provides estimates of COVID-19 transmission rates and explains their evolution for selected European countries since the start of the pandemic taking account of changes in voluntary and government-mandated social distancing, incentives to comply, vaccination and the emergence of new variants. Evidence based on panel data modeling indicates that the diversity of outcomes that we document may have resulted from the non-linear interaction of mandated and voluntary social distancing and the economic incentives that governments provided to support isolation. The importance of these ...
Working Paper
Half-panel jackknife fixed effects estimation of panels with weakly exogenous regressor
This paper considers estimation and inference in fixed effects (FE) panel regression models with lagged dependent variables and/or other weakly exogenous (or predetermined) regressors when NN (the cross section dimension) is large relative to TT (the time series dimension). The paper first derives a general formula for the bias of the FE estimator which is a generalization of the Nickell type bias derived in the literature for the pure dynamic panel data models. It shows that in the presence of weakly exogenous regressors, inference based on the FE estimator will result in size distortions ...
Journal Article
Economic shocks reverberate in world of interconnected trade ties
As the world economy slowly recovers from the Great Recession and global trade flows remain weak, net trade contributions to domestic growth become more critical.