Patrick Sevestre

The Econometrics of Panel Data

This completely restructured, updated third edition of The Econometrics of Panel Data, first published in 1992, provides a general overview of the econometrics of panel data, both from a theoretical and from an applied viewpoint. Since the pioneering papers by Kuh, Mundlak, Hoch and Balestra and Nerlove, the pooling of cross section and time series data has become an increasingly popular way of quantifying economic relationships. Each series provides information lacking in the other, so a combination of both leads to more accurate and reliable results than would be achievable by one type of series alone. This third, enhanced edition provides a complete and up to date presentation of theoretical developments as well as surveys about how econometric tools are used to study firms and households behaviors. It contains eleven entirely new chapters while the others have been largely revised to account for recent developments in the field.

Financial Systems and the Role of Banks in Monetary Policy Transmission in the Euro Area

This paper offers a comprehensive comparison of the structure of banking and financial markets in the euro area. Based on this, several hypotheses about the role of banks in monetary policy transmission are developed. Many of the predictions that have been proposed for the U.S. are deemed unlikely to apply in Europe. Testing these hypotheses we find that monetary policy does alter bank loan supply, with the effects most dependent on the liquidity of individual banks. Unlike in the US, the size of a bank does generally not explain its lending reaction. We also show that the standard publicly available database, BankScope, obscures the heterogeneity across banks. Indeed, for several types of questions BankScope data suggest very different answers than more complete data that reside at national central banks.

Heterogeneity in consumer price stickiness: a microeconometric investigation

This paper examines heterogeneity in price stickiness using a large, original, set of individual price data collected at the retail level for the computation of the French CPI. To that end, we estimate, at a very high level of disaggregation, competing-risks duration models that distinguish between price increases, price decreases and product replacements. The main .ndings are the following: i) cross-product and cross-outlet-type heterogeneity in both the shape of the hazard function and the impact of covariates is pervasive ii) at the product-outlet type level, the baseline hazard function of a price spell is non-decreasing iii) there is strong evidence of state-dependence, especially for price increases.

Price Rigidity. Evidence from the French CPI Micro-data

Based upon a large fraction of the price records used for computing the French CPI, we document consumer price rigidity in France. We first provide a methodological discussion of issues involved in estimating average price duration with micro-data. The average duration of prices in the sectors covered by the database (65% of CPI) is then found to be around 8 months. A strong heterogeneity across sectors both in the average duration of prices and in the pattern of price setting is reported. There is no clear evidence of downward nominal rigidity, since price cuts are almost as frequent as price rises. Moreover, the average size of a change in price is quite large in both cases. Overall, while our results do not entail a clear conclusion about the existence of menu costs, there is evidence of both time-dependent and state-dependent price setting behaviors by retailers.

Lumpy Price Adjustments, A Microeconometric Analysis

Based on a reduced-form state-dependent pricing model with random thresholds, we specify and estimate a nonlinear panel data model with an unobserved factor representing the common cost or demand components of the unobserved optimal price. Using this model, we are able to assess the relative importance of common and idiosyncratic shocks in explaining the frequency and magnitude of price changes in the case of a wide variety of consumer products in Belgium and France. We find that the mean level and variability of the random thresholds are key for explaining differences across products in the frequency of price changes. We also find that the idiosyncratic shocks represent the most important driver of the magnitude of price changes. Supplementary materials for this article are available online.

A note on autoregressive error components models

Abstract The purpose of this paper is to shed some light on the asymptotic behavior of a wide class of estimators for a dynamic error components model when only the number of individuals tends to infinity, the number of time periods being kept fixed. In particular, it is shown that this asymptotic behavior is highly dependent on the assumption about the initial observations and that it offers very good approximations to the small sample behavior of the various estimators under consideration.

What Do Thirteen Million Price Records Have to Say About Consumer Price Rigidity

Based on the analysis of 13 million price records underlying the computation of the French consumer price index, we provide a detailed assessment of consumer price rigidity. Our main results are as follows. The average duration of prices is around 8 months. Price durations and the patterns of price-setting strongly differ across sectors. Price cuts are almost as frequent as increases, suggesting no specific downward nominal rigidity. Price changes typically have large absolute sizes. Time variation in the frequency of price changes and in their size both contribute to inflation fluctuations. Overall there is evidence of both time- and state-dependent price-setting.

Dynamic Linear Models

One of the main advantages of panel data is that it allows one to study the dynamics of economic behaviour at an individual level. Unfortunately, when dynamic models are estimated using time series of cross sections data, the usual least squares methods (such as those presented in Chapters 3 and 4) do not lead to consistent estimates for the parameters of the two most commonly used models for panel data (i.e., fixed effects and error components models). This inconsistency results from the fact that the disturbance terms are serially correlated in these models, which causes the lagged endogenous variable to be correlated with those disturbances. As in the time series context, we do not have analytical results about the small sample properties of the various estimators of these models. The only available results come from Monte-Carlo simulation studies (see Nerlove [1967], [1971]). Hence, one must rely on the asymptotic properties of these methods and assume that the size of the sample grows to infinity.

Error Components Models

In this chapter we discuss the error components model — probably the most commonly used approach of modelling economic relashionships using panel data. The reasons for this popularity are:1 1. Their ability to handle data bases of virtually any size. 2. The estimation and hypothesis testing methods are derived from wellknown, classical procedures. 3. Most of the problems and difficulties can be handled in the traditional framework. 4. It is the model whose theoretical frontiers have been most thoroughly investigated. 5. The estimation results are easily interpreted. 6. The most commonly used econometric and statistical software packages can be used with only minor modifications.

The Impact of a 'Soda Tax' on Prices: Evidence from French Micro Data

Based on an original data set of more than 500,000 non-alcoholic beverage price records, we evaluate the impact on consumer prices of the ?soda tax?, an excise on drinks with added sugar or sweetener, introduced in France in January 2012. We adopt a difference in differences approach and find that the tax was gradually passed through to the prices of the taxed beverages. After 6 months of its introduction, it was fully shifted to soda prices and almost fully shifted to the prices of fruit drinks, while the pass-through for flavoured waters was incomplete. We also find that the pass-through was heterogeneous across brands and retail groups.