ARE OECD MACROECONOMIC VARIABLES TREND STATIONARY? EVIDENCE FROM PANEL STATIONARITY TESTS ALLOWING FOR A STRUCTURAL BREAK AND CROSS-SECTIONAL DEPENDENCE

This article applies the panel stationarity test with a break proposed by Hadri and Rao (2008) to examine whether 14 macroeconomic variables of OECD countries can be best represented as random walk or stationary fluctuations around a deterministic trend. In contrast to previous studies, based essentially on visual inspection of the break type or just applying the most general break model, we use a model selection procedure based on BIC. We do this for each time series so that heterogeneous break models are allowed for in the panel. Our results suggest, overwhelmingly, that if we account for a structural break, cross-sectional dependence and choose the break models to be congruent with the data, then the null of stationarity cannot be rejected for all the 14 macroeconomic variables examined in this article. This is in sharp contrast with the results obtained by Hurlin (2004), using the same data but a different methodology.

TESTING FOR STATIONARITY IN HETEROGENEOUS PANEL DATA IN THE CASE OF MODEL MISSPECIFICATION

This paper investigates the performance of the tests proposed by Hadri and by Hadri and Larsson for testing for stationarity in heterogeneous panel data under model misspecification. The panel tests are based on the well known KPSS test (cf. Kwiatkowski et al.) which considers two models: stationarity around a deterministic level and stationarity around a deterministic trend. There is no study, as far as we know, on the statistical properties of the test when the wrong model is used. We also consider the case of the simultaneous presence of the two types of models in a panel. We employ two asymptotics: joint asymptotic, T, N -> infinity simultaneously, and T fixed and N allowed to grow indefinitely. We use Monte Carlo experiments to investigate the effects of misspecification in sample sizes usually used in practice. The results indicate that the assumption that T is fixed rather than asymptotic leads to tests that have less size distortions, particularly for relatively small T with large N panels (micro-panels) than the tests derived under the joint asymptotics. We also find that choosing a deterministic trend when a deterministic level is true does not significantly affect the properties of the test. But, choosing a deterministic level when a deterministic trend is true leads to extreme over-rejections. Therefore, when unsure about which model has generated the data, it is suggested to use the model with a trend. We also propose a new statistic for testing for stationarity in mixed panel data where the mixture is known. The performance of this new test is very good for both cases of T asymptotic and T fixed. The statistic for T asymptotic is slightly undersized when T is very small (

Power-law behaviour, heterogeneity, and trend chasing

Long-range dependence in volatility is one of the most prominent examples in financial market research involving universal power laws. Its characterization has recently spurred attempts to provide some explanations of the underlying mechanism. This paper contributes to this recent line of research by analyzing a simple market fraction asset pricing model with two types of traders---fundamentalists who trade on the price deviation from estimated fundamental value and trend followers whose conditional mean and variance of the trend are updated through a geometric learning process. Our analysis shows that agent heterogeneity, risk-adjusted trend chasing through the geometric learning process, and the interplay of noisy fundamental and demand processes and the underlying deterministic dynamics can be the source of power-law distributed fluctuations. In particular, the noisy demand plays an important role in the generation of insignificant autocorrelations (ACs) on returns, while the significant decaying AC patterns of the absolute returns and squared returns are more influenced by the noisy fundamental process. A statistical analysis based on Monte Carlo simulations is conducted to characterize the decay rate. Realistic estimates of the power-law decay indices and the (FI)GARCH parameters are presented.

Heterogeneity, convergence, and autocorrelations

This paper is a contribution to the literature on the explanatory power and calibration of heterogeneous asset pricing models. We set out a new stochastic market-fraction asset pricing model of fundamentalists and trend followers under a market maker. Our model explains key features of financial market behaviour such as market dominance, convergence to the fundamental price and under- and over-reaction. We use the dynamics of the underlying deterministic system to characterize these features and statistical properties, including convergence of the limiting distribution and autocorrelation structure. We confirm these properties using Monte Carlo simulations.

Disparities in breast cancer mortality trends between 30 European countries: Retrospective trend analysis of WHO mortality database

Objective: To examine changes in temporal trends in breast cancer mortality in women living in 30 European countries.
Design: Retrospective trend analysis.
Data source: WHO mortality database on causes of deaths
Subjects reviewed: Female deaths from breast cancer from 1989 to 2006
Main outcome measures: Changes in breast cancer mortality for all women and by age group (<50, 50-69, and >= 70 years) calculated from linear regressions of log transformed, age adjusted death rates. Joinpoint analysis was used to identify the year when trends in all age mortality began to change.
Results: From 1989 to 2006, there was a median reduction in breast cancer mortality of 19%, ranging from a 45% reduction in Iceland to a 17% increase in Romania. Breast cancer mortality decreased by >= 20% in 15 countries, and the reduction tended to be greater in countries with higher mortality in 1987-9. England and Wales, Northern Ireland, and Scotland had the second, third, and fourth largest decreases of 35%, 29%, and 30%, respectively. In France, Finland, and Sweden, mortality decreased by 11%, 12%, and 16%, respectively. In central European countries mortality did not decline or even increased during the period. Downward mortality trends usually started between 1988 and 1996, and the persistent reduction from 1999 to 2006 indicates that these trends may continue. The median changes in the age groups were -37% (range -76% to -14%) in women aged <50, -21% (-40% to 14%) in 50-69 year olds, and -2% (-42% to 80%) in >= 70 year olds.
Conclusions: Changes in breast cancer mortality after 1988 varied widely between European countries, and the UK is among the countries with the largest reductions. Women aged <50 years showed the greatest reductions in mortality, also in countries where screening at that age is uncommon. The increasing mortality in some central European countries reflects avoidable mortality.

Environmental indifference? A critique of environmentally deterministic theories of peatland archaeological site construction in Ireland

Climate change, whether gradual or sudden, has frequently been invoked as a causal factor to explain many aspects of cultural change during the prehistoric and early historic periods. Critiquing such theories has often proven difficult, not least because of the imprecise dating of many aspects of the palaeoclimate or archaeological records and the difficulties of merging the two strands of research. Here we consider one example of the archaeological record – peatland site construction in Ireland – which has previously been interpreted in terms of social response to climate change and examine whether close scrutiny of the archaeological and palaeoenvironmental records uphold the climatically deterministic hypotheses. We evaluate evidence for phasing in the temporal distribution of trackways and related sites in Irish peatlands, of which more than 3,500 examples have been recorded, through the examination of ~350 dendrochronological and 14C dates from these structures. The role of climate change in influencing when such sites were constructed is assessed by comparing visually and statistically the frequency of sites over the last 4,500 years with well-dated, multi-proxy climate reconstructions from Irish peatlands. We demonstrate that national patterns of “peatland activity” exist that indicate that the construction of sites in bogs was neither a constant nor random phenomenon. Phases of activity (i.e. periods in which the number of structures increased), as well as the ‘lulls’ that separate them, show no consistent correlation with periods of wetter or drier conditions on the bogs, suggesting that the impetus for the start or cessation of such activity was not climatically-determined. We propose that trigger(s) for peatland site construction in Ireland must instead also be sought within the wider, contemporary social background. Perhaps not surprisingly, a comparison with archaeological and palynological evidence shows that peatland activity tends to occur at times of more expansive settlement and land-use, suggesting that the bogs were used when the landscape was being more widely occupied. Interestingly, the lulls in peatland site construction coincide with transitional points between nominal archaeological phases, typically defined on the basis of their material culture, implying that there may indeed have been a cultural discontinuity at these times. © 2012 Elsevier Ltd. All rights reserved.