Tests for Non-Linear Cointegration

It took more than 25 years since the discovery of cointegration for someone to come up with general tests of cointegration in nonlinear regression models. Choi and Saikkonen published a paper on the topic in the June issue of Econometric Theory. One place where this might be relevant is, of course the environmental Kuznets curve, where Martin Wagner argued that standard cointegration methods

Survey Paper on Estimating Consumer Demand Systems

If you are looking for a nice survey paper on estimating static consumer demand systems (I was) Apostolos Serletis and William Barnett put one out a couple of years ago in the Journal of Econometrics. It's a nicely organized paper that should be understandable to anyone who's done the basic graduate level micro-economics and econometrics courses. In other words, it is really approachable compared

Index Numbers and Consistency in Aggregation: Part II

This post gets even more technical than the last. I'm just blogging about what I'm reading in the course of my research. I read a whole bunch more papers on index numbers, which got more and more technical. The bottom line is that for most applications the chain Fisher index is an appropriate index to use. An index is superlative if it is exact for an aggregator function (e.g. a production

Index Numbers and Consistency in Aggregation: Part I

There are many formulae for the index numbers used to compute price and quantity indices, such as a consumer price index or a volume index of imports, in economics. The Laspeyres, Paasche, Divisia, and Fisher indices are the best known of these formulae. A body of theory examines the criteria that can be used to decide which formula to use in a particular application. One important property is

Famous Rejections

In a posthumously published paper, Clive Granger discusses the evolution of the idea of cointegration. It turns out that his famous 1987 paper with Engel in Econometrica was rejected twice (without an invitation to resubmit). The first version was sole authored. The second one was dual authored "but it was also rejected for not being sufficiently original"! That's one of the papers that won Engel

Econometrics and Economics

I went to two presentations at ANU recently by well-known American economists" Joshua Angrist and Frank Lichtenberg. Angrist presented work on the charter school in Lynn, MA. The presentation was clear and I thought quite impressive and convincing in showing a major impact of attending the school on students' performance, at least in mathematics. Lichtenberg showed the effect of diagnostic

Polynomial Cointegration and the Global Warming Hypothesis

Michael Beenstock and Yaniv Reingewertz have a fairly new working paper that applies the method of polynomial cointegration to testing the global warming hypothesis. This paper has apparently been discussed quite a bit in the blogosphere.The authors find that they cannot reject the null hypothesis that the forcing variables that they consider do not polynomially cointegrate with global

Debate on Unit Roots in Temperature Series

A huge debate with 1672 comments erupted on Bart Verheggen's blog regarding the issue of unit roots in temperature series. I didn't read much of it, but the main point seems to be that when there are unit roots in time series you need to take that in account when determining if there is a trend in the series and it is harder to reject the null of no trend. This is all true but you can also

Serializing Energy and Growth Review Paper

I'm updating my 2004 working paper on energy and economic growth to submit to the annual Ecological Economics Reviews published in the Annals of New York Academy of Sciences. I did publish a short version of the working paper as a chapter in the Encyclopedia of Energy but I didn't submit it to a journal because some of my fundamental ideas about energy and growth began to change just after I

Two Paper Submissions this Week

We submitted two papers this week - more details when the working paper versions are up on the web. One is a resubmission (to a different journal) of my paper on between estimates of the EKC. The other is a new paper coauthored with a former student at Rensselaer, Ran Zhang, and Ken Simons an Assistant Prof. at RPI. It's a paper about corporate social responsibility based on a chapter from her

Omitted Variables Bias in Estimating the Rate of Global Warming

There has been a lot of discussion in the media and blogosphere of a supposed cooling of the global climate since 1998 that is being pounced upon by climate change sceptics. This supposed trend is almost certainly not a http://www.garnautreview.org.au/CA25734E0016A131/WebObj/Globaltemperaturetrends-BreuschandVahid(ANU)2008/$File/Global%20temperature%20trends%20-%20Breusch%20and%20Vahid%20(ANU)%

Energy/Capital Ratio

There doesn't seem to be much of relation between energy intensity and GDP per capita. But this chart shows that there is a relationship between energy per dollar of (estimated) capital and GDP per capita:The points off to the top right are mostly oil producers. Apart from those points there seems to be a clear downward trend. High income countries use less energy per dollar of capital than poor

Estimating a Two-Equation Model of the Swedish Economy

My coauthor sent me some Swedish capital stock estimates for 1850-2000 which allows me to estimate the production function equation that explains economic output in terms of labor, capital and energy in addition to the energy cost ratio equation I estimated on its own before. Having two equations which share many of the same parameters makes estimating those parameters accurately a lot easier. I

The Declining Relative Value of Energy

One of the little known facts of energy economics is that in the long-run data that we have available the value of energy relative to the value of output has fallen over time. The chart shows the data for Sweden. Output here is gross output. Relative to GDP the ratio was 1:1 or above in the early 19th century. That fact seems to rule out structural change as an explanation of the trend.

Between Estimates of the Environmental Kuznets Curve

I submitted this paper to JEEM today. It follows up on a paper published earlier this year in the journal by Vollebergh et al. They argued that existing estimates of the environmental Kuznets curve are contingent on the treatment of the "time effects". Traditional panel data regression estimators assume that there is a different intercept for each country and often that there is a intercept for