Haichun Ye

Which panel data estimator should I use

This study employs Monte Carlo experiments to evaluate the performances of a number of common panel data estimators when serial correlation and cross-sectional dependence are both present. It focuses on fixed effects models with less than 100 cross-sectional units and between 10 and 25 time periods (such as are commonly employed in empirical growth studies). Estimator performance is compared on two dimensions: (i) root mean square error and (ii) accuracy of estimated confidence intervals. An innovation of our study is that our simulated panel data sets are designed to look like ‘real-world’ panel data. We find large differences in the performances of the respective estimators. Further, estimators that perform well on efficiency grounds may perform poorly when estimating confidence intervals and vice versa. Our experimental results form the basis for a set of estimator recommendations. These are applied to ‘out of sample’ simulated panel data sets and found to perform well.

Understanding the Crude Oil Price: How Important Is the China Factor?

This paper employs monthly data on Chinas net oil import from January 1997 to June 2010 to assess the role of Chinas net import in the evolution of the crude oil price. Based on a vector autoregression (VAR) analysis, we find that the growth of Chinas net oil import has no significant impact on monthly oil price changes and there is no Granger causality between the two variables. The historical decomposition indicates that shocks to Chinas oil demand have only played a small role in the oil price run-up of 2002-2008. We also calculate the price changes implied by Chinas net oil import growth from a longer-term supply and demand shift perspective.

Twin Sons of Different Mothers: The Long and the Short of the Twin Deficits Debate

Interest in the twin deficits hypothesis fluctuates in tandem with the U.S. current account deficit. Surprisingly though, a statistically robust relationship between budget and trade deficits has been difficult to pin down. We argue that a big part of this difficulty is due to the failure to allow for structural breaks in the series when (either explicitly or implicitly) modeling their time series properties. We show that both series are break stationary (and conditionally heteroskedastic) and argue that while there is no common pattern in the long run, the short-run dynamics reveal a sizeable and fairly persistent positive relationship between budget deficit shocks and current account deficit shocks. (JEL F41, E6, H6)

What to Target? Inflation or Exchange Rate

This study empirically compares, for the first time, the popular exchange-rate–targeting regime with the recently emerged inflation-targeting framework in developing countries. Applying a variety of propensity score matching methods and dynamic panel generalized method of moments (GMM) regressions to a sample of 50 developing countries for the years 1990–2006, we find strong and robust evidence that, compared to exchange-rate targeting, inflation targeting leads to a significantly lower inflation rate, and the lower inflation rate does not come at a cost of slower growth.

On the Granger causality between median inflation and price dispersion

The Granger-causal relationship between the size and dispersion of fluctuations in sub-components of the US Consumer Price Index (CPI) is examined using both in-sample and out-of-sample tests and data from January 1968 to December 2008. Strong in-sample evidence is found for feedback between median inflation and price dispersion; the evidence for Granger-causation from median inflation to price dispersion remains strong in out-of-sample testing, but is less strong for Granger-causation in the opposite direction. The implications of these results for the variety of price-level determination models in the literature are discussed.

CURRENT ACCOUNT ADJUSTMENT IN DEVELOPING COUNTRIES: THE ROLE OF EXCHANGE RATE REGIMES

This article employs hazard models to investigate the role of exchange rate regimes in the timing of current account adjustment in developing countries. We identify high current account deficit spells and find that fixed exchange rate regimes increase the duration of high deficit spells and thus delay current account adjustment. The result is robust to a variety of model specifications and alternative classifications of exchange rate regimes. When distinguishing between hard pegs and soft pegs, we notice that the delay in the current account adjustment is primarily driven by hard pegs rather than soft pegs.