397 research outputs found
Heteroskedasticity Robust Panel Unit Root Testing Under Variance Breaks in Pooled Regressions
No full textNoting that many economic variables display occasional shifts in their second order moments, we investigate the performance of homogenous panel unit root tests in the presence of permanent volatility shifts. It is shown that in this case the test statistic proposed by Herwartz and Siedenburg (2008) is asymptotically standard Gaussian. By means of a simulation study we illustrate the performance of first and second generation panel unit root tests and undertake a more detailed comparison of the test in Herwartz and Siedenburg (2008) and its heteroskedasticity consistent Cauchy counterpart introduced in Demetrescu and Hanck (2012a). As an empirical illustration, we reassess evidence on the Fisher hypothesis with data from nine countries over the period 1961Q2-2011Q2. Empirical evidence supports panel stationarity of the real interest rate for the entire subperiod. With regard to the most recent two decades, the test results cast doubts on market integration, since the real interest rate is diagnosed nonstationary.German Research Foundation [HE 2188/3-2
Hodges-Lehmann Detection of Structural Shocks - An Analysis of Macroeconomic Dynamics in the Euro Area
No full textStock return prediction under GARCH — An empirical assessment
No full textThe GARCH model and its numerous variants have been applied widely both in the financial literature and in practice. For purposes of quasi maximum likelihood estimation, innovations to GARCH processes are typically assumed to be identically and independently distributed, with mean zero and unit variance (strong GARCH). Under less restrictive assumptions (the absence of unconditional correlation, weak GARCH), higher order dependency patterns might be exploited for the ex ante forecasting of GARCH innovations, and hence, stock returns. In this paper, rolling windows of empirical stock returns are used to test the independence of consecutive GARCH innovations. Rolling p-values from independence testing reflect the time variation of serial dependence, and provide useful information for signaling one-step-ahead directions of stock price changes. Ex ante forecasting gains are documented for nonparametric innovation predictions, especially if the sign of the innovation predictors is combined with independence diagnostics (p-values) and/or the sign of linear return forecasts. (C) 2017 International Institute of Forecasters. Published by Elsevier B.V. All rights reserved.German Research Foundation [HE 2188/8-1
Predicting tail risks by a Markov switching MGARCH model with varying copula regimes
No full textAbstract
To improve the dynamic assessment of risks of speculative assets, we apply a Markov switching MGARCH approach to portfolio risk forecasting. More specifically, we take advantage of the flexible Markov switching copula multivariate GARCH (MS‐C‐MGARCH) model of Fülle and Herwartz (2022). As an empirical illustration, we take the perspective of a risk‐averse agent and employ the suggested model for assessments of future risks of portfolios composed of a high‐yield equity index (S&P 500) and two safe‐haven investment instruments (i.e., Gold and US Treasury Bond Futures). We follow recent suggestions to employ the expected shortfall as a prime assessment of tail risks. To accurately evaluate the merits of the new model, we back‐test the risk forecasting for daily returns over 10 years for heterogeneous market environments including, for example, the COVID‐19 pandemic. We find that the MS‐C‐MGARCH model outperforms benchmark volatility models (MGARCH, C‐MGARCH) in predicting both value‐at‐risk and expected shortfall. The superiority of the MS‐C‐MGARCH model becomes stronger, when the share of comparably risky assets in the portfolio is relatively large.Deutsche Forschungsgemeinschaft https://doi.org/10.13039/50110000165
Long‐run neutrality of demand shocks: Revisiting Blanchard and Quah (1989) with independent structural shocks
No full textOne Share Fits All? Regional Variations in the Extent of the Shadow Economy in Europe
No full textHerwartz H., Tafenau E. and Schneider F. One share fits all? Regional variations in the extent of the shadow economy in Europe, Regional Studies. A multiple indicators multiple causes (MIMIC) approach with spatial effects is followed to estimate the extent of the shadow economy in the regions of the European Union in 2007 and 2008. The shadow economic sector is smallest in regions of the Netherlands and Denmark and highest in Greece, Poland, Portugal and Romania. In several countries the extent of shadow activities varies markedly across regions, calling for regional diversification of measures against it. Moreover, the eligibility status for structural funding by the European Union changes for some regions if shadow activities are included in the gross domestic product to their full extent
Structural vector autoregressions with Markov switching: Combining conventional with statistical identification of shocks
No full textIn structural vector autoregressive (SVAR) analysis a Markov regime switching (MS) property can be exploited to identify shocks if the reduced form error covariance matrix varies across regimes. Unfortunately, these shocks may not have a meaningful structural economic interpretation. It is discussed how statistical and conventional identifying information can be combined. The discussion is based on a VAR model for the US containing oil prices, output, consumer prices and a short-term interest rate. The system has been used for studying the causes of the early millennium economic slowdown based on traditional identification with zero and long-run restrictions and using sign restrictions. We find that previously drawn conclusions are questionable in our framework. (C) 2014 Elsevier B.V. All rights reserved.Deutsche Forschungsgemeinschaft [HE 2188-3/1
Size-corrected inference in fiscal policy reaction functions: a three country assessment
No full textGovernment ideology and fiscal consolidation: Where and when do government parties adjust public spending?
No full textToo many cooks could spoil the broth: choice overload and the provision of ambulatory health care
No full textAbstract Patient empowerment calls for an intensified participation of (informed) patients with more treatment opportunities to choose from. A growing body of literature argues that confronting consumers with too many opportunities can lead to a choice overload (CO) resulting in uncertainty that the selected alternative dominates all other options in the choice set. We examine whether there is a CO effect in the demand for ambulatory health care in Germany by analyzing the association of medical specialists supply on so-called patients’ health uncertainty. Further, we investigate if the CO effect is smaller in areas with a higher density of general practitioners (GPs). We find that patients who live in an area with a large supply of specialists are subject to a CO effect that is expressed by an increased health uncertainty. The coordinating role of GPs seems to be effective to reduce the CO effect, while preserving free consumer choice.Funder:
Deutsche Forschungsgemeinschaft
http://dx.doi.org/10.13039/501100001659Funder:
Universität zu Lübeck
http://dx.doi.org/10.13039/50110000416
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