Giovanni Urga

The implications of tourism specialisation in the long run: an econometric analysis for 13 OECD economies.

Abstract The paper aims to illumine the longrun impact of specialisation in tourism. It is shown that specialisation in tourism may not be deleterious for economic welfare once the terms of trade are considered. Conditions for an improvement in welfare are laid out and their existence tested by econometric methods within an almost ideal demand system formulation of tourist expenditure for 13 OECD economies. The analysis uses cointegration techniques and novel sequential break dating procedures evaluated where the time dimension is small. The values of the estimated parameters suggest that long run growth may not be harmed by tourism specialisation.

A Time Varying Parameter Model to Test for Predictability and Integration in Stock Markets of Transition Economies

This article introduces a model, based on the Kalman-filter framework, that allows for time-varying parameters, latent factors, and a general generalized autoregressive conditional heteroscedasticity (GARCH) structure for the residuals. With this extension of the Bekaert and Harvey model, it is possible to test if an emerging stock market becomes more efficient over time and more integrated with other already established markets in situations in which no macroeconomic conditioning variables are available. We apply this model to the Czech, Polish, Hungarian, and Russian stock markets. We use data at daily frequency running from April 7, 1994, to July 10, 1997. A latent factor captures macroeconomic expectations. Concerning predictability, measured with time-varying autocorrelations, Hungary reached efficiency before 1994. Russia shows signs of ongoing convergence toward efficiency. For Poland and the Czech Republic, we find no improvements. With regard to market integration, there is evidence that the importance of Germany has changed over time for all markets. Shocks in the United Kingdom are positively related to the Czech and Polish markets but not to the Russian or the Hungarian markets. Shocks in the United States have no impact on these markets with the exception of Russia. A strong negative correlation between Russia and the United States and Germany tends to disappear over the time span studied. We also show that these markets exhibit significant asymmetric GARCH effects where bad news generates greater volatility. In Hungary, good news, instead, generates greater volatility, which leads us to formulate a liquidity hypothesis.

Dynamic translog and linear logit models: a factor demand analysis of interfuel substitution in US industrial energy demand

Abstract We compare and contrast two popular dynamic flexible functional forms for cost functions, the translog and the logit [J. Bus. Econ. Stat. 8 (1990) 347–353], using data on US industrial energy demand from 1960 to 1992 which has been analysed by previous studies (Energy Econ. 11 (1989) 89–94; Appl. Econ. 21 (1989) 931–945; J. Bus. Econ. Stat. 13 (1995) 459–465]. We show the crucial role played by different dynamic formulations of the translog in this analysis of factor demands with respect to rates of dynamic adjustment and substitution possibilities. We conclude that the poor performance of the dynamic translog relative to the dynamic logit cannot be explained solely by dynamic model mis-specification or the inclusion of price-unresponsive non-energy fuel use data. Our most robust empirical result is that coal and oil are substitutes.

Testing Asset Pricing Models With Coskewness

In this article we investigate portfolio coskewness using a quadratic market model as a return-generating process. We show that the portfolios of small (large) firms have negative (positive) coskewness with the market. We test an asset pricing model including coskewness by checking the validity of the restrictions that it imposes on the return-generating process. We find evidence of an additional component in expected excess returns, which is not explained by either covariance or coskewness with the market. However, this unexplained component is homogeneous across portfolios in our sample and modest in magnitude. Finally, we investigate the implications of erroneously neglecting coskewness for testing asset pricing models, with particular attention to the empirically detected explanatory power of firm size.

Identifying Jumps in Financial Assets: A Comparison Between Nonparametric Jump Tests

We perform a comprehensive Monte Carlo comparison between nine alternative procedures available in the literature to detect jumps in financial assets using high-frequency data. We evaluate size and power properties of the procedures under alternative sampling frequencies, persistence in volatility, jump size and intensity, and degree of contamination with microstructure noise. The overall best performance is shown by the Andersen, Bollerslev, and Dobrev (2007) and Lee and Mykland (2008) intraday procedures (ABD-LM), provided the price process is not very volatile. We propose two extensions to the existing battery of tests. The first regards the finite sample improvements based on simulated critical values for the ABD-LM procedure. The second regards a procedure that combines frequencies and tests able to reduce the number of spurious jumps. Finally, we report an empirical analysis using real high frequency data on five stocks listed in the New York Stock Exchange.

Privatisation Methods and Economic Growth in Transition Economies

We investigate the impact of differences in privatisation method on national economic performance in transition economies. Our approach is to estimate, using dynamic panel data methods, a growth equation over 23 countries for the period 1990-2001. Among our results, we find that mass privatisation has significant positive effect on growth across a wide variety of definitions and specifications. This result holds with particular force after 1995, i.e., once the period of early transition and recession was over. Our analysis suggests that an advantage of mass privatisation was that it led spontaneously to development of the capital market, which is significantly correlated with economic growth.

Efficiency, scale and scope economies in the Ukrainian banking sector in 1998

Abstract This paper evaluates the current development of the Ukrainian banking system. The research was concentrated on the evaluation of cost and profit efficiency and scale and scope economies for 79 from 168 Ukrainian commercial banks in 1998. There is evidence that small banks operate more efficiently in cost terms but are less efficient in profit terms and furthermore, there is a substantial difference in scale economies between small and large banks. Large banks show significant diseconomies of scale while small ones show significant scale economies. This result could suggest that current technology in the financial sector does not allow efficient growth and concentration of the financial sector in Ukraine.

Robust GMM Tests for Structural Breaks

We propose a class of new robust GMM tests for endogenous structural breaks. The tests are based on supremum, average and exponential functionals derived from robust GMM estimators with bounded influence function. We study the theoretical local robustness properties of the new tests and show that they imply a uniformly bounded asymptotic sensitivity of size and power under general local deviations from a reference model. We then analyze the finite sample performance of the new robust tests in some Monte Carlo simulations, and compare it with that of classical GMM tests for structural breaks. In large samples, we find that the performance of classical asymptotic GMM tests can be quite unstable already under slight departures from some given reference distribution. In particular, the loss in power can be substantial in some models. Robust asymptotic tests for structural breaks yield important power improvements already under slight local departures from the reference model. This holds both in exactly identified and overidentified model settings. In small samples, bootstrapped versions of both the classical and the robust GMM tests provide a very accurate and very stable empirical size also for quite small sample sizes. However, bootstrapped robust GMM tests are found to provide again a higher finite sample efficiency.

The influence of uncertainty on investment in the UK: A macro or micro phenomenon?

While the theory examining the relationship between uncertainty and investment has suggested new research avenues, it has not had strong predictive power. Nevertheless, at the policy level the benefits for investment of a more stable economic climate are being emphasised. These considerations point to the need for empirical work. Accordingly, this paper draws on industry level panel data, obtained by marrying the UK Census of Production with the CBI Industrial Trends Survey, and applies dynamic panel data methods to distinguish between macro and micro sources of uncertainty and to consider the role of financial factors. It is found that both sources of uncertainty exert a considerable negative impact on investment, while financial factors may be important in some industries. Copyright 2001 by Scottish Economic Society.

Asymptotics for Panel Models with Common Shocks

This article develops a novel asymptotic theory for panel models with common shocks. We assume that contemporaneous correlation can be generated by both the presence of common regressors among units and weak spatial dependence among the error terms. Several characteristics of the panel are considered: cross-sectional and time-series dimensions can either be fixed or large; factors can either be observable or unobservable; the factor model can describe either a cointegration relationship or a spurious regression, and we also consider the stationary case. We derive the rate of convergence and the limit distributions for the ordinary least square (OLS) estimates of the model parameters under all the aforementioned cases.