Regional inequality is severe in China since regional development is uneven due to various initial conditions and government policies. We employ unit root tests allowing for structural breaks to alternative inequality measures from 1952 to 2000. Empirical results indicate that (1) the regional inequality is trend stationary with structural breaks rather than follow a random walk. Thus, ignoring...

This chapter discusses estimation, specification testing, and model selection of predictive density models. In particular, predictive density estimation is briefly discussed, and a variety of different specification and model evaluation tests due to various authors including Christoffersen and Diebold (2000), Diebold, Gunther and Tay (1998), Diebold, Hahn and Tay (1999), White (2000), Bai (2003...

Interest in the interface of nonstationarity and nonlinearity has been increasing in the econometric literature. This paper provides a formal method of testing for nonstationary long memory against the alternative of particular forms of nonlinerarity. The nonlinear models we consider are ESTAR and SETAR models. We provide analysis on the asymptotic properties of the tests and carry out a detail...

Modeling financial volatility is an important part of empirical finance. This paper provides a literature review of the most relevant volatility models, with a particular focus on forecasting models. We firstly discuss the empirical foundations of different kinds of volatility. The paper, then, analyses the non-parametric measure of volatility, named realized variance, and its empirical applica...

For financial assets whose best quotes almost always change by jumping by the market’s price tick size (one cent, five cents, etc.), this paper proposes an estimator of Quadratic Variation which controls for microstructure effects. It measures the prevalence of alternations, where quotes jump back to their just-previous price. It defines a simple property called “uncorrelated alternation”, whic...

The performance of a kernel HAC estimator depends on the accuracy of the estimation of the normalized curvature, an unknown quantity in the optimal bandwidth represented as the spectral density and its derivative. This paper proposes to estimate it with a general class of kernels. The AMSE of the kernel estimator and the AMSE-optimal bandwidth are derived. It is shown that the optimal bandwidth...

This paper proposes a methodology that combines the use of Schwarz’s BIC in subset autoregression and subset transfer function identification along with the posterior odds ratio test developed by Poskitt & Tremayne (1987) in the context of testing for Granger-causality and cointegration tests. This approach provides a measure for the strength (decisiveness) of causality and cointegration betwee...

In this paper, we estimate a health care demand function for 18 OECD countries for the period 1972-1995. We consider a demand side approach where health expenditure depend on per capita GDP and the relative price of health care. We use panel data unit root and stationarity tests to characterize our data. Then, we test cointegration between our variables with Kao[16] panel data cointegration tes...

The purpose of this paper is to investigate the ability of parameter instability tests in regressions with I(1) processes to discriminate between changes in the cointegrating relationship and changes in the marginal distribution of the regressors. Using annual data for the G-7 countries and the Purchasing Power Parity, we conclude that the regression coefficient between the price level differen...

This paper employs Hamilton’s (1989) original Markov-switching model and time-varying Markov-switching model developed by Filardo (1994), respectively, to investigate the business cycle and evaluate the usefulness of the coincident and leading indexes in dating the business cycle and in predicting future GDP in Taiwan. The empirical results do suggest that these two indexes help date the busine...