Christophe Hurlin

University of Orleans

France

Personnal website:
Other affiliations:

Christophe Hurlin created these companion sites

The Risk Map: A New Tool for Validating Risk Models
Abstract
This paper presents a new tool for validating risk models. This tool, called the Risk Map, jointly accounts for the number and the magnitude of extreme losses and graphically summarizes all information about the performance of a risk model. It relies on the concept of Value-at-Risk (VaR) super exception, which is defined as a situation in which the loss exceeds both the standard VaR and a VaR defined at an extremely low coverage probability. We then formally test whether the sequences of exceptions and super exceptions is rejected by standard model validation tests. We show that the Risk Map can be used to validate market, credit, operational, or systemic (e.g. CoVaR) risk estimates or to assess the performance of the margin system of a clearing house.
Colletaz, G., C. Hurlin, and C. Perignon, "The Risk Map: A New Tool for Validating Risk Models", SSRN.
Authors: Colletaz
Hurlin
Perignon
Coders: Colletaz
Hurlin
Perignon
Last update
Thu Jul 25 05:01:00 CEST 2013
Ranking
51
Runs
146
Visits
431
A New Approach to Comparing VaR Estimation Methods
Abstract
We develop a novel backtesting framework based on multidimensional Value-at-Risk (VaR) that focuses on the left tail of the distribution of the bank trading revenues. Our coverage test is a multivariate generalization of the unconditional test of Kupiec (Journal of Derivatives, 1995). Applying our method to actual daily bank trading revenues, we find that non-parametric VaR methods, such as GARCH-based methods or filtered Historical Simulation, work best for bank trading revenues.
Perignon, C., and D. Smith, C. Hurlin, "A New Approach to Comparing VaR Estimation Methods", Journal of Derivatives , 15, 54-66.
Authors: Perignon
Smith
Coders: Perignon
Smith
Hurlin
Last update
Mon Jul 16 10:41:00 CEST 2012
Ranking
54
Runs
11
Visits
270
Backtesting Value-at-Risk: A GMM Duration-based Test
Abstract
This paper proposes a new duration-based backtesting procedure for VaR forecasts. The GMM test framework proposed by Bontemps (2006) to test for the distributional assumption (i.e. the geometric distribution) is applied to the case of the VaR forecasts validity. Using simple J-statistic based on the moments defined by the orthonormal polynomials associated with the geometric distribution, this new approach tackles most of the drawbacks usually associated to duration based backtesting procedures. First, its implementation is extremely easy. Second, it allows for a separate test for unconditional coverage, independence and conditional coverage hypothesis (Christoffersen, 1998). Third, Monte-Carlo simulations show that for realistic sample sizes, our GMM test outperforms traditional duration based test. Besides, we study the consequences of the estimation risk on the duration-based backtesting tests and propose a sub-sampling approach for robust inference derived from Escanciano and Olmo (2009). An empirical application for Nasdaq returns confirms that using GMM test leads to major consequences for the ex-post evaluation of the risk by regulation authorities.
Colletaz, G., B. Candelon, C. Hurlin, and S. Tokpavi, "Backtesting Value-at-Risk: A GMM Duration-based Test", Journal of Financial Econometrics, 9(2), 314-343 .
Authors: Candelon
Colletaz
Hurlin
Tokpavi
Coders: Colletaz
Candelon
Hurlin
Tokpavi
Last update
Thu Jun 28 11:01:00 CEST 2012
Ranking
55
Runs
23
Visits
291
Testing Interval Forecasts: A GMM-Based Approach
Abstract
This paper proposes a new evaluation framework of interval forecasts. Our model free test can be used to evaluate intervals forecasts and/or High Density Region, potentially discontinuous and/or asymmetric. Using simple J-statistic based on the moments defined by the orthonormal polynomials associated with the Binomial distribution, this new approach presents many advantages. First, its implementation is extremely easy. Second, it allows for a separate test for unconditional coverage, independence and conditional coverage hypothesis. Third, Monte-Carlo simulations show that for realistic sample sizes, our GMM test outperforms traditional LR test. These results are corroborated by an empirical application on SP500 and Nikkei stock market indexes. The empirical application for financial returns confirms that using a GMM test leads to major consequences for the ex-post evaluation of interval forecasts produced by linear versus non linear models.
Dumitrescu, E., C. Hurlin, "Testing Interval Forecasts: A GMM-Based Approach", Journal of Forecasting, -.
Authors: Dumitrescu
Hurlin
Madkour
Coders: Dumitrescu
Hurlin
Last update
Tue Jun 05 04:57:00 CEST 2012
Ranking
10
Runs
29
Visits
340
Backtesting Value-at-Risk: A Duration-Based Approach
Abstract
Financial risk model evaluation or backtesting is a key part of the internal model’s approach to market risk management as laid out by the Basle Committee on Banking Supervision. However, existing backtesting methods have relatively low power in realistic small sample settings. Our contribution is the exploration of new tools for backtesting based on the duration of days between the violations of the Value-at-Risk. Our Monte Carlo results show that in realistic situations, the new duration-based tests have considerably better power properties than the previously suggested tests.
Hurlin, C., and C. Perignon, "Backtesting Value-at-Risk: A Duration-Based Approach", Journal of Financial Econometrics, 2, 84-108.
Authors: Pelletier
Christoffersen
Coders: Hurlin
Perignon
Last update
Mon Jul 23 05:33:00 CEST 2012
Ranking
26
Runs
17
Visits
207
Threshold Effects of the Public Capital Productivity : An International Panel Smooth Transition Approach
Abstract
Using a non linear panel data model we examine the threshold effects in the productivity of the public capital stocks for a panel of 21 OECD countries observed over 1965-2001. Using the so-called "augmented production function" approach, we estimate various specifications of a Panel Smooth Threshold Regression (PSTR) model recently developed by Gonzalez, Teräsvirta and Van Dijk (2004). One of our main results is the existence of strong threshold effects in the relationship between output and private and public inputs : whatever the transition mechanism specified, tests strongly reject the linearity assumption. Moreover this model allows cross-country heterogeneity and time instability of the productivity without specification of an ex-ante classification over individuals. Consequently it is posible to give estimates of productivity coefficients for both private and public capital stocks at any time and for each countries in the sample. Finally we proposed estimates of individual time varying elasticities that are much more reasonable than those previously published.
Hurlin, C., "Threshold Effects of the Public Capital Productivity : An International Panel Smooth Transition Approach", University of Orléans.
Authors: Colletaz
Hurlin
Coders: Hurlin
Last update
Tue Jul 22 04:30:00 CEST 2014
Ranking
31
Runs
2290
Visits
677
Evaluating Interval Forecasts
Abstract
A complete theory for evaluating interval forecasts has not been worked out to date. Most of the literature implicitly assumes homoskedastic errors even when this is clearly violated and proceed by merely testing for correct unconditional coverage. Consequently, the author sets out to build a consistent framework for conditional interval forecast evaluation, which is crucial when higher-order moment dynamics are present. The new methodology is demonstrated in an application to the exchange rate forecasting procedures advocated in risk management.
Hurlin, C., C. Perignon, "Evaluating Interval Forecasts", International Economic Review, 39, 841-862.
Authors: Christoffersen
Coders: Hurlin
Perignon
Last update
Fri Mar 09 03:40:00 CET 2012
Ranking
32
Runs
57
Visits
167
Are Public Investment Efficient in Creating Capital Stocks in Developing Countries? Estimates of Government Net Capital Stocks for 26 Developing Countries, 1970-2002
Abstract
We provide various estimates of the government net capital stocks for a panel of 26 developing countries over the period 1970-2001. These internationally comparable series of public capital are proposed as a complementary solution to the use of public investment flows and to the use of physical measures of infrastructure when one comes to evaluate the productivity of the public capital formation in developing countries. In these estimates based on various assumptions, we attempt to take into account the potential inefficiency of public investment in creating capital.
Arestoff, F., and C. Hurlin, "Are Public Investment Efficient in Creating Capital Stocks in Developing Countries? Estimates of Government Net Capital Stocks for 26 Developing Countries, 1970-2002", Economics Bulletin, 30, 1-11.
Authors: Arestoff
Hurlin
Coders: Arestoff
Hurlin
Last update
Mon Jul 23 09:33:00 CEST 2012
Ranking
46
Runs
2
Visits
49
The Best of Both Worlds: A Hybrid Approach to Calculating Value at Risk
Abstract
The hybrid approach combines the two most popular approaches to VaR estimation: RiskMetrics and Historical Simulation. It estimates the VaR of a portfolio by applying exponentially declining weights to past returns and then finding the appropriate percentile of this time-weighted empirical distribution. This new approach is very simple to implement. Empirical tests show a significant improvement in the precision of VaR forecasts using the hybrid approach relative to these popular approaches.
Hurlin, C., C. Perignon, "The Best of Both Worlds: A Hybrid Approach to Calculating Value at Risk", Risk, 1, 64-67.
Authors: Boudoukh
Richardson
Whitelaw
Coders: Hurlin
Perignon
Last update
Tue Jul 17 07:54:00 CEST 2012
Ranking
52
Runs
4
Visits
67
A Theoretical and Empirical Comparison of Systemic Risk Measures: MES versus CoVaR
Abstract
In this paper, we propose a theoretical and empirical comparison of two popular systemic risk measures - Marginal Expected Shortfall (MES) and Delta Conditional Value at Risk (ΔCoVaR) - that can be estimated using publicly available data. First, we assume that the time-varying correlation completely captures the dependence between firm and market returns. Under this assumption, we derive three analytical results: (i) we show that the MES corresponds to the product of the conditional ES of market returns and the time-varying beta of this institution, (ii) we give an analytical expression of the ΔCoVaR and show that the CoVaR corresponds to the product of the VaR of the firm's returns and the time-varying linear projection coefficient of the market returns on the firm's returns and (iii) we derive the ratio of the MES to the ΔCoVaR. Second, we relax this assumption and propose an empirical comparison for a panel of 61 US financial institutions over the period from January 2000 to December 2010. For each measure, we propose a cross-sectional analysis, a time-series comparison and rankings analysis of these institutions based on the two measures.
Benoit, S., G. Colletaz, C. Hurlin, and C. Perignon, "A Theoretical and Empirical Comparison of Systemic Risk Measures: MES versus CoVaR", SSRN.
Authors: Benoit
Colletaz
Hurlin
Perignon
Coders: Benoit
Colletaz
Hurlin
Perignon
Last update
Thu Oct 25 11:35:00 CEST 2012
Ranking
53
Runs
181
Visits
398
Network Effects and Infrastructure Productivity in Developing Countries
Abstract
This paper proposes to investigate the threshold effects of the productivity of infrastructure investment in developing countries within a panel data framework. Various speci.cations of an augmented production function that allow for endogenous thresholds are considered. The overwhelming outcome is the presence of strong threshold effects in the relationship between output and private and public inputs. Whatever the transition mechanism used, the testing procedures lead to strong rejection of the linearity of this relationship. In particular, the productivity of infrastructure investment generally exhibits some network effects. When the available stock of infrastructure is very low, investment in this sector has the same productivity as non-infrastructure investment. On the contrary, when a minimumnetwork is available, the marginal productivity of infrastructure investment is generally largely greater than the productivity of other investments. Finally, when the main network is achieved, its marginal productivity becomes similar to the productivity of other investment.
Candelon, B., G. Colletaz, and C. Hurlin, "Network Effects and Infrastructure Productivity in Developing Countries", Maastricht University.
Authors: Candelon
Colletaz
Hurlin
Coders: Candelon
Colletaz
Hurlin
Last update
Thu Mar 14 10:17:00 CET 2013
Ranking
35
Runs
414
Visits
431
Value-at-Risk (Chapter 7: Portfolio Risk - Analytical Methods)
Abstract
Book description: To accommodate sweeping global economic changes, the risk management field has evolved substantially since the first edition of Value at Risk, making this revised edition a must. Updates include a new chapter on liquidity risk, information on the latest risk instruments and the expanded derivatives market, recent developments in Monte Carlo methods, and more. Value at Risk, Second Edition, will help professional risk managers understand, and operate within, today’s dynamic new risk environment.
Hurlin, C., C. Perignon, "Value-at-Risk (Chapter 7: Portfolio Risk - Analytical Methods)", McGraw-Hill, Second edition.
Authors: Jorion
Coders: Hurlin
Perignon
Last update
Fri Mar 16 04:09:00 CET 2012
Ranking
33
Runs
9
Visits
303
Currency Crises Early Warning Systems: why they should be Dynamic
Abstract
This paper introduces a new generation of Early Warning Systems (EWS) which takes into account the dynamics, i.e. the persistence in the binary crisis indicator. We elaborate on Kauppi and Saikonnen (2008), which allows to consider several dynamic specifications by re- lying on an exact maximum likelihood estimation method. Applied so as to predict currency crises for fifteen countries, this new EWS turns out to exhibit significantly better predic- tive abilities than the existing models both within and out of the sample, thus vindicating dynamic models in the quest for optimal EWS.
Candelon, B., E. Dumitrescu, and C. Hurlin, "Currency Crises Early Warning Systems: why they should be Dynamic", Maastricht University.
Authors: Candelon
Dumitrescu
Hurlin
Coders: Candelon
Dumitrescu
Hurlin
Last update
Mon Jun 04 05:52:00 CEST 2012
Ranking
45
Runs
64
Visits
112
Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties
Abstract
We consider pooling cross-section time series data for testing the unit root hypothesis. The degree of persistence in individual regression error, the intercept and trend coefficient are allowed to vary freely across individuals. As both the cross-section and time series dimensions of the panel grow large, the pooled t-statistic has a limiting normal distribution that depends on the regression specification but is free from nuisance parameters. Monte Carlo simulations indicate that the asymptotic results provide a good approximation to the test statistics in panels of moderate size, and that the power of the panel-based unit root test is dramatically higher, compared to performing a separate unitroottest for each individual time series.
Hurlin, C., "Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties", Journal of Econometrics, 108, 1-24.
Authors: Levin
Lin
Chu
Coders: Hurlin
Last update
Thu Jun 28 11:07:00 CEST 2012
Ranking
37
Runs
220
Visits
322
Backtesting Value-at-Risk: From Dynamic Quantile to Dynamic Binary Tests
Abstract
In this paper we propose a new tool for backtesting that examines the quality of Value-at-Risk (VaR) forecasts. To date, the most distinguished regression-based backtest, proposed by Engle and Manganelli (2004), relies on a linear model. However, in view of the dichotomic character of the series of violations, a non-linear model seems more appropriate. In this paper we thus propose a new tool for backtesting (denoted DB) based on a dynamic binary regression model. Our discrete-choice model, e.g. Probit, Logit, links the sequence of violations to a set of explanatory variables including the lagged VaR and thelagged violations in particular. It allows us to separately test the unconditional coverage, the independence and the conditional coverage hypotheses and it is easy to implement. Monte-Carlo experiments show that the DB test exhibits good small sample properties in realistic sample settings (5% coverage rate with estimation risk). An application on a portfolio composed of three assets included in the CAC40 market index is finally proposed.
Hurlin, C., and E. Dumitrescu, "Backtesting Value-at-Risk: From Dynamic Quantile to Dynamic Binary Tests", Finance, 33.
Authors: Hurlin
Pham
Coders: Hurlin
Dumitrescu
Last update
Thu Jul 05 03:07:00 CEST 2012
Ranking
20
Runs
46
Visits
168
Appendices for the article "Is Public Capital Really Productive? A Methodological Reappraisal"
Abstract
We present an evaluation of the main empirical approaches used in the literature to estimate the contribution of public capital stock to growth and private factors’ productivity. Based on a simple stochastic general equilibrium model, built as to reproduce the main long-run relations observed in US post-war historical data, we show that the production function approach may not be reliable to estimate this contribution. Our analysis reveals that this approach largely overestimates the public capital elasticity, given the presence of a common stochastic trend shared by all non-stationary inputs.
Hurlin, C., and A. Minea, "Appendices for the article "Is Public Capital Really Productive? A Methodological Reappraisal" ", Université d'Orléans.
Authors: Hurlin
Minea
Coders: Hurlin
Minea
Last update
Wed Sep 26 09:50:00 CEST 2012
Ranking
21
Runs
N.A.
Visits
28
How To Evaluate an Early Warning System? Towards a unified Statistical Framework for Assessing Financial Crises Forecasting Methods
Abstract
This paper proposes an original and unified toolbox to evaluate financial crisis Early Warning Systems (EWS). It presents four main advantages. First, it is a model-free method which can be used to asses the forecasts issued from different EWS (probit, logit, markov switching models, or combinations of models). Second, this toolbox can be applied to any type of crisis EWS (currency, banking, sovereign debt, etc.). Third, it does not only provide various criteria to evaluate the (absolute) validity of EWS forecasts but also proposes some tests to compare the relative performance of alternative EWS. Fourth, our toolbox can be used to evaluate both in-sample and out-of-sample forecasts. Applied to a logit model for twelve emerging countries we show that the yield spread is a key variable for predicting currency crises exclusively for South-Asian countries. Besides, the optimal cut-off correctly allows us to identify now on average more than 2/3 of the crisis and calm periods.
Candelon, B., E. Dumitrescu, and C. Hurlin, "How To Evaluate an Early Warning System? Towards a unified Statistical Framework for Assessing Financial Crises Forecasting Methods", IMF Economic Review, 60.
Authors: Candelon
Dumitrescu
Hurlin
Coders: Candelon
Dumitrescu
Hurlin
Last update
Mon Jul 23 05:34:00 CEST 2012
Ranking
34
Runs
24
Visits
269
Techniques for Verifying the Accuracy of Risk Management Models
Abstract
Risk exposures are typically quantified in terms of a "Value at Risk" (VaR) estimate. A VaR estimate corresponds to a specific critical value of a portfolio's potential one-day profit and loss probability distribution. Given their function both as internal risk management tools and as potential regulatory measures of risk exposure, it is important to quantify the accuracy of an institution's VaR estimates. This study shows that the formal statistical procedures that would typically be used in performance-based VaR verification tests require large samples to produce a reliable assessment of a model's accuracy in predicting the size and likelihood of very low probability events. Verification test statistics based on historical trading profits and losses have very poor power in small samples, so it does not appear possible for a bank or its supervisor to verify the accuracy of a VaR estimate unless many years of performance data are available. Historical simulation-based verification test statistics also require long samples to generate accurate results: Estimates of 0.01 critical values exhibit substantial errors even in samples as large as ten years of daily data.
Hurlin, C., C. Perignon, "Techniques for Verifying the Accuracy of Risk Management Models", Journal of Derivatives, 3, 73-84.
Authors: Kupiec
Coders: Hurlin
Perignon
Last update
Tue Apr 17 02:14:00 CEST 2012
Ranking
57
Runs
26
Visits
339
A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test
Abstract
The panel data unit root test suggested by Levin and Lin (LL) has been widely used in several applications, notably in papers on tests of the purchasing power parity hypothesis. This test is based on a very restrictive hypothesis which is rarely ever of interest in practice. The Im–Pesaran–Shin (IPS) test relaxes the restrictive assumption of the LL test. This paper argues that although the IPS test has been offered as a generalization of the LL test, it is best viewed as a test for summarizing the evidence from a number of independent tests of the sample hypothesis. This problem has a long statistical history going back to R. A. Fisher. This paper suggests the Fisher test as a panel data unit root test, compares it with the LL and IPS tests, and the Bonferroni bounds test which is valid for correlated tests. Overall, the evidence points to the Fisher test with bootstrap-based critical values as the preferred choice. We also suggest the use of the Fisher test for testing stationarity as the null and also in testing for cointegration in panel data.
Hurlin, C., "A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test", Oxford Bulletin of Economics and Statistics, 61, 631-652.
Authors: Maddala
Wu
Coders: Hurlin
Last update
Mon Oct 08 09:15:00 CEST 2012
Ranking
59
Runs
217
Visits
129
Is Public Capital Really Productive? A Methodological Reappraisal
Abstract
We present an evaluation of the main empirical approaches used in the literature to estimate the contribution of public capital stock to growth and private factors' productivity. Based on a simple stochastic general equilibrium model, built as to reproduce the main long-run relations observed in US post-war historical data, we show that the production function approach may not be reliable to estimate this contribution. Our analysis reveals that this approach largely overestimates the public capital elasticity, given the presence of a common stochastic trend shared by all non-stationary inputs.
Minea, A., and C. Hurlin, "Is Public Capital Really Productive? A Methodological Reappraisal", University of Orleans.
Authors: Minea
Hurlin
Coders: Minea
Hurlin
Last update
Mon Sep 10 09:19:00 CEST 2012
Ranking
43
Runs
3
Visits
42
Margin Backtesting
Abstract
This paper presents a validation framework for collateral requirements or margins on a derivatives exchange. It can be used by investors, risk managers, and regulators to check the accuracy of a margining system. The statistical tests presented in this study are based either on the number, frequency, magnitude, or timing of margin exceedances, which are de…ned as situations in which the trading loss of a market participant exceeds his or her margin. We also propose an original way to validate globally the margining system by aggregating individual backtesting statistics ob- tained for each market participant.
Hurlin, C., and C. Perignon, "Margin Backtesting", University of Orleans, HEC Paris.
Authors: Hurlin
Perignon
Coders: Hurlin
Perignon
Last update
Wed Jul 23 01:26:00 CEST 2014
Ranking
36
Runs
377
Visits
433
Testing for Granger Non-causality in Heterogeneous Panels
Abstract
This paper proposes a very simple test of Granger (1969) non-causality for hetero- geneous panel data models. Our test statistic is based on the individual Wald statistics of Granger non causality averaged across the cross-section units. First, this statistic is shown to converge sequentially to a standard normal distribution. Second, the semi- asymptotic distribution of the average statistic is characterized for a fixed T sample. A standardized statistic based on an approximation of the moments of Wald statistics is hence proposed. Third, Monte Carlo experiments show that our standardized panel statistics have very good small sample properties, even in the presence of cross-sectional dependence.
Dumitrescu, E., and C. Hurlin, "Testing for Granger Non-causality in Heterogeneous Panels", Economic Modelling, Forthcoming.
Authors: Dumitrescu
Hurlin
Coders: Dumitrescu
Hurlin
Last update
Wed Jul 12 04:35:00 CEST 2017
Ranking
40
Runs
451
Visits
502
Value-at-Risk (Chapter 5: Computing VaR)
Abstract
Book description: To accommodate sweeping global economic changes, the risk management field has evolved substantially since the first edition of Value at Risk, making this revised edition a must. Updates include a new chapter on liquidity risk, information on the latest risk instruments and the expanded derivatives market, recent developments in Monte Carlo methods, and more. Value at Risk will help professional risk managers understand, and operate within, today’s dynamic new risk environment.
Hurlin, C., C. Perignon, "Value-at-Risk (Chapter 5: Computing VaR)", MacGraw-Hill, Third Edition.
Authors: Jorion
Coders: Hurlin
Perignon
Last update
Mon Mar 19 09:33:00 CET 2012
Ranking
44
Runs
63
Visits
328
Backtesting Value-at-Risk Accuracy: A Simple New Test
Abstract
This paper proposes a new test of value-at-risk (VAR) validation. Our test exploits the idea that the sequence of VAR violations (hit function) – taking value 1 - α if there is a violation, and -α otherwise – for a nominal coverage rate α verifies the properties of a martingale difference if the model used to quantify risk is adequate (Berkowitz et al., 2005). More precisely, we use the multivariate portmanteau statistic of Li and McLeod (1981), an extension to the multivariate framework of the test of Box and Pierce (1970), to jointly test the absence of autocorrelation in the vector of hit sequences for various coverage rates considered relevant for the management of extreme risks. We show that this shift to a multivariate dimension appreciably improves the power properties of the VAR validation test for reasonable sample sizes.
Hurlin, C., and S. Tokpavi, "Backtesting Value-at-Risk Accuracy: A Simple New Test", Journal of Risk, 9, 19-37.
Authors: Hurlin
Tokpavi
Coders: Hurlin
Tokpavi
Last update
Tue Mar 13 05:03:00 CET 2012
Ranking
49
Runs
2
Visits
240
Unit Root Tests for Panel Data
Abstract
This paper develops unit root tests for panel data. These tests are devised under more general assumptions than the tests previously proposed. First, the number of groups in the panel data is assumed to be either finite or infinite. Second, each group is assumed to have different types of nonstochastic and stochastic components. Third, the time series spans for the groups are assumed to be all different. Fourth, the alternative where some groups have a unit root and others do not can be dealt with by the tests. The tests can also be used for the null of stationarity and for cointegration, once relevant changes are made in the model, hypotheses, assumptions and underlying tests. The main idea for our unit root tests is to combine p-values from a unit root test applied to each group in the panel data. Combining p-values to formulate tests is a common practice in meta-analysis. This paper also reports the finite sample performance of our combination unit root tests and Im et al.'s [Mimeo (1995)] t-bar test. The results show that most of the combination tests are more powerful than the t-bar test in finite samples. Application of the combination unit root tests to the post-Bretton Woods US real exchange rate data provides some evidence in favor of the PPP hypothesis.
Hurlin, C., "Unit Root Tests for Panel Data", Journal of International Money and Finance, 20, 249-272.
Authors: Choi
Coders: Hurlin
Last update
Mon Oct 08 09:16:00 CEST 2012
Ranking
60
Runs
62
Visits
261
Testing for Unit Roots in Heterogeneous Panels
Abstract
This paper proposes unit root tests for dynamic heterogeneous panels based on the mean of individual unit root statistics. In particular it proposes a standardized t-bar test statistic based on the (augmented) Dickey–Fuller statistics averaged across the groups. Under a general setting this statistic is shown to converge in probability to a standard normal variate sequentially with T (the time series dimension) →∞, followed by N (the cross sectional dimension) →∞. A diagonal convergence result with T and N→∞ while N/T→k,k being a finite non-negative constant, is also conjectured. In the special case where errors in individual Dickey–Fuller (DF) regressions are serially uncorrelated a modified version of the standardized t-bar statistic is shown to be distributed as standard normal as N→∞ for a fixed T, so long as T>5 in the case of DF regressions with intercepts and T>6 in the case of DF regressions with intercepts and linear time trends. An exact fixed N and T test is also developed using the simple average of the DF statistics. Monte Carlo results show that if a large enough lag order is selected for the underlying ADF regressions, then the small sample performances of the t-bar test is reasonably satisfactory and generally better than the test proposed by Levin and Lin (Unpublished manuscript, University of California, San Diego, 1993).
Hurlin, C., "Testing for Unit Roots in Heterogeneous Panels ", Journal of Econometrics, 115, 53-74.
Authors: Im
Pesaran
Shin
Coders: Hurlin
Last update
Mon Oct 08 09:16:00 CEST 2012
Ranking
61
Runs
57
Visits
106
Testing for a Unit Root in Panels with Dynamic Factors
Abstract
This paper studies testing for a unit root for large n and T panels in which the cross-sectional units are correlated. To model this cross-sectional correlation, we assume that the data are generated by an unknown number of unobservable common factors. We propose unit root tests in this environment and derive their (Gaussian) asymptotic distribution under the null hypothesis of a unit root and local alternatives. We show that these tests have significant asymptotic power when the model has no incidental trends. However, when there are incidental trends in the model and it is necessary to remove heterogeneous deterministic components, we show that these tests have no power against the same local alternatives. Through Monte Carlo simulations, we provide evidence on the finite sample properties of these new tests.
Hurlin, C., "Testing for a Unit Root in Panels with Dynamic Factors", Journal of Econometrics, 122, 81-126.
Authors: Moon
Perron
Coders: Hurlin
Last update
Mon Oct 08 09:16:00 CEST 2012
Ranking
62
Runs
399
Visits
124
Determining the Number of Factors in Approximate Factors Models
Abstract
In this paper we develop some econometric theory for factor models of large dimensions. The focus is the determination of the number of factors (r), which is an unresolved issue in the rapidly growing literature on multifactor models. We first establish the convergence rate for the factor estimates that will allow for consistent estimation of r. We then propose some panel criteria and show that the number of factors can be consistently estimated using the criteria. The theory is developed under the framework of large cross-sections (N) and large time dimensions (T). No restriction is imposed on the relation between N and T. Simulations show that the proposed criteria have good finite sample properties in many configurations of the panel data encountered in practice.
Hurlin, C., "Determining the Number of Factors in Approximate Factors Models", Econometrica, 70, 191-221.
Authors: Bai
Ng
Coders: Hurlin
Last update
Tue Jan 29 04:48:00 CET 2013
Ranking
39
Runs
66
Visits
230
Maximum Likelihood Methods for Models of Markets in Disequilibrium
Abstract
For the abstract, please click on: http://www.jstor.org/discover/10.2307/1914215?uid=3738016&uid=2&uid=4&sid=56146953873
Hurlin, C., "Maximum Likelihood Methods for Models of Markets in Disequilibrium", Econometrica, 42, 1013-1030.
Authors: Maddala
Nelson
Coders: Hurlin
Last update
Fri Feb 15 00:53:00 CET 2013
Ranking
50
Runs
85
Visits
391
Why don’t Banks Lend to the Private Sector in Egypt?
Abstract
Bank credit to the private sector fell as a share to GDP during the last decade, in spite of a successful bank recapitalization in the middle of the 2000s and high and stable growth before the recent macroeconomic turmoil. This paper explains this trend based on both bank supply factors and demand for credit from the private sector. First the paper describes the evolution of the banks’ sources and uses of funds in the period 2005-2011, characterized by two different cycles of external capital flows. Then it estimates supply and demand equations of credit to the private sector, using quarterly data for the period 1999-2011. First, the system of simultaneous equations is estimated assuming continuous market clearing. Then the system is estimated allowing for transitory disequilibrium. In general, the main results are robust to the market clearing assumption. Our main findings show that, while real industrial production and the stock market have a significant impact on credit demand, deposits and claims on government affected the supply of credit in Egypt. Finally, both models yield similar results for the most recent period of private credit contraction: the single most important factor explaining the largest share of the decline is the expansion of banking credit to the public sector. The slowdown in economic activity and the contraction of bank deposits explain the remainder of the predicted contraction in bank credit to the private sector.
Herrera, S., C. Hurlin, and C. Zaki, "Why don’t Banks Lend to the Private Sector in Egypt? ", World Bank Working Paper Series.
Authors: Herrera
Hurlin
Zaki
Coders: Herrera
Hurlin
Zaki
Last update
Thu Oct 17 10:54:00 CEST 2013
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56
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112
Are Public Investment Efficient in Creating Capital Stocks in Developing Countries? Estimates of Government Net Capital Stocks for 26 Developing Countries, 1970-2002
Abstract
In many poor countries, the problem is not that governments do not invest, but that these investments do not create productive capital. So, the cost of public investments does not correspond to the value of the capital stocks. In this paper, we propose an original non parametric approach to evaluate the efficiency function that links variations (net of depreciation) of stocks to public investments. We consider four sectors (electricity, telecommunications, roads and railways) of two Latin American countries (Mexico and Colombia). We show that there is a large discrepancy between the amount of investments and the value of increases in stocks.
Arestoff, F., and C. Hurlin, "Are Public Investment Efficient in Creating Capital Stocks in Developing Countries? Estimates of Government Net Capital Stocks for 26 Developing Countries, 1970-2002 ", Economics Bulletin, 30, 1515-1531.
Authors: Arestoff
Hurlin
Coders: Arestoff
Hurlin
Last update
Mon Oct 08 09:18:00 CEST 2012
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11
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N.A.
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26