JAE Newsletter Spring Summer 2008

JAE Newsletter :: Spring 2008

NEWSLETTER

Issue 6 Spring/Summer 2008

From the Editor

I am delighted to announce that Professor Edward Vytlacil, of Yale University, has joined the Journal's Editorial Committee as a new Co-Editor, with effect from 27th February 2008.

Professor Vytlacil is an NBER Faculty Research Fellow and an Associate Editor of the Journal of Business, Economics and Statistics. His main research interests include econometric evaluation of social programs, analysis of treatment effects, and ordered and the use of latent variable models discrete choice models. I would like to welcome Ed and particularly encourage paper submissions in his areas of expertise.

This Newsletter includes a larger number of abstracts of the forthcoming papers and aims to highlight the scope and breadth of the empirical econometrics that the Journal publishes. These include papers on application of extreme value theory to the analysis of risk of catastrophic terrorism, modelling of binary choice in the presence of social interactions, the effects of model uncertainty on empirics of economic growth.

I am also pleased to introduce four new JAE Distinguished Authors. Congratulations to Professors, Baltagi, Clements, Kooreman and Tobias.

M Hashem Pesaran Editor of JAE

In this Issue:

1. Distinguished Authors

2. Dissertation Prize

3. Annual Lecture Series

4. Forthcoming Articles Data Archive

5. Top 10 downloaded articles in 2007

6. Conferences Sponsored by JAE

7. Journal of Applied Econometrics Data Archive

8. How to publish in JAE

9. Aims and Scope of JAE

10. Free Content Alerting!

file:///F|/emails/2008/july deployment/JAE Newsletter Spring 2008.html (1 of 9)9/18/2008 8:38:12 AM


1. Journal of Applied Econometrics Distinguished Authors

In recognition of the authors who have made significant contributions to this Journal, the Editorial Committee introduced in 1999 a scheme to honour those authors who have published the equivalent of three single-author articles by naming them Journal of Applied Econometrics Distinguished Authors.

Distinguished Authors are given a one-year free subscription to the Journal to mark the award, and receive a personal invitation to the Journal's Annual Lecture Series and to its Annual Dinner. The list of Distinguished Authors will be published regularly in the Journal.

The Journal of Applied Econometrics is pleased to welcome as Distinguished Authors:

Professor Badi Baltagi Syracuse University, USA

Professor Michael P Clements University of Warwick, UK

Professor Peter Kooreman Tilburgh University, The Netherlands

and

Professor Justin Tobias Iowa State University, USA

Badi Batalgi has published the following articles in the Journal of Applied Econometrics:

1. "On efficient estimation with panel data: An empirical comparison of instrumental variables estimators" by Badi H. Baltagi, Sophon Khanti-Akom, JAE, Vol 5, No 4, pp. 401-40

2. "Excess capacity: a permanent characteristic of US airlines?" by Badi H. Baltagi, James M. Griffin, Sharada R. Vadali, JAE, Vol 13, No 6, pp. 645-657

3. "Applied econometrics rankings: 1989-1995" by Badi H. Baltagi, JAE, Vol 14, No 4, pp. 423-44

4. "Heterogeneity and cross section dependence in panel data models: theory and applications introduction" by Badi H. Baltagi, M. Hashem Pesaran, JAE, Vol 22, No 2, pp. 229-232

5. "Panel unit root tests and spatial dependence" by Badi H. Baltagi, Georges Bresson, Alain Pirotte, JAE, Vol 22, No 2, pp 339-360

Michael Clements has published the following articles in the Journal of Applied Econometrics:



1. "Forecasting in cointegrated systems" by Michael P. Clements, David F. Hendry, JAE, Vol 10, pp. 127-146

2. "Intercept corrections and structural change" by Michael P. Clements, David F. Hendry, JAE, Vol 11, No 5, pp. 475-494

3. "A Monte Carlo study of the forecasting performance of empirical SETAR models" by Michael P. Clements, Jeremy Smith, JAE, Vol 14, No 2 pp. 123-141

4. "Evaluating interval forecasts of high-frequency financial data" by Michael P. Clements, Nick Taylor, JAE, Vol 18, No 4 pp. 445-456

5. "An Evaluation of the forecasts of the Federal Reserve: A pooled approach" by M. P. Clements, F. Joutz, H. O. Stekler, JAE, Vol 22, No 1, pp.121-13

Peter Kooreman has published the following articles in the Journal of Applied Econometrics:

1. "A micro-econometric analysis of vacation behaviour" by Arthur Van Soest, Peter Kooreman, JAE, Vol 2, No 3, pp. 215-226,

2. "Estimation of econometric models of some discrete games" by Peter Kooreman, JAE, Vol 9, No 3, pp. 255-268

3. "Identification and estimation of a class of household production models" by M. Kerkhofs, P. Kooreman, JAE, Vol 18, No 3, pp. 337-36

4. "A discrete choice model with social interactions: with an application to high school teen behavior" by A.R. Soetevent, P. Kooreman, JAE, Vol 22, No 3, pp. 599-624

Justin Tobias has published the following articles in the Journal of Applied Econometrics:

1. "A finite-sample hierarchical analysis of wage variation across public high schools: evidence from the NLSY and high school and beyond" by J. L. Tobias, M. Li, JAE, Vol 18, No 3, pp. 315-336

2. "Do dropouts suffer from dropping out? Estimation and prediction of outcome gains in generalized selection models" by M. Li, D. J. Poirier, J. L. Tobias, JAE, Vol 19, No 2, pp. 203-225

3. "Learning about heterogeneity in returns to schooling" by G. Koop, J. L. Tobias, JAE, Vol 19, No 7, pp. 827-849

4. "Semiparametric Bayesian inference in multiple equation models" by G. Koop, D. J. Poirier, J. Tobias, JAE, Vol 20, No 6, pp. 723-747

5. "Bayesian inference for the gravity model" by P. Ranjan, J.L Tobias, JAE, Vol 22, No 4, pp. 817-83

Professor Stephen Hall, of Imperial College, London, was welcomed as the Journal of Applied Econometrics' first Distinguished Author in 1999. He was joined in file:///F|/emails/2008/july deployment/JAE Newsletter Spring 2008.html (3 of 9)9/18/2008 8:38:12 AM


2000 by Professor Timo Ter svirta, of the Stockholm School of Economics, in 2001 by Professor Peter Phillips of Yale University, USA and Professor Geert Ridder of the University of Southern California, USA, in 2002 by Professor Philip Hans Franses of the Erasmus University, The Netherlands and Professor Clive W.J. Granger of the University of California at San Diego, USA, in 2003 by Professor Adrian R. Pagan of the Australian National University, and in 2004 by Professor Gordon Anderson of the University of Toronto and Professor Stephen Pudney of the University of Essex, in 2005 by Professor Gary Koop of the University of Strathclyde, and Professors Zacharias Psaradakis and Martin Sola of Birkbeck College, University of London, and in 2007 by Professor Pravin Trivedi of Indiana University.

Points are awarded as follows:

1 author: 12 points2 authors: 8 points3 authors: 6 points4+ authors: 4 points

36 points are required to become a Journal of Applied Econometrics Distinguished Author.

M Hashem Pesaran Editor

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2. Dissertation Prize

The Journal of Applied Econometrics wishes to draw your attention to its Dissertation Prize, launched in 2002, and invites submission of nominations.The Prize is open to PhD students in economics writing a dissertation with a substantive empirical application.The empirical application may be in any field, such as labour economics, monetary economics, empirical finance, business cycle, international trade, public economics, and applied topics in the field of microeconomics.

Nominations must be submitted by 15th July 2008, and must include a draft dissertation chapter or other paper taken from the dissertation, and two covering letters: one from a faculty member with knowledge of the dissertation work, and one from the student.Nominations should be sent to the JAE Editorial Office, Room 91, Faculty of Economics, University of Cambridge, Sidgwick Avenue, Cambridge CB3 9DD, UK, or by e-mail to [email protected].

In the evaluation of nominations, the emphasis will be on the careful and rigorous application of econometric techniques and the appropriate interpretation of the results. The economic content of the nominated chapter or paper will be stressed. Clear expression and good use of English are important.

Successful candidates will be selected and notified by 15th September 2008 and will receive a prize of $2,500 each for research support. It is a condition of the prize that the dissertation supported by the award is submitted to the Journal of Applied Econometrics for possible publication.It is a condition of the prize that the Journal of Applied Econometrics is given first refusal to publish the dissertation supported by the award.

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3. Annual Lecture Series



The 2008 Journal of Applied Econometrics Annual Lecture was given by: Richard Blundell University College London on 'The Dynamics of Income, Earnings and Consumption' at CEMFI, Madrid, 6-7 June, 2008

The JAE Lecture Series was launched in 1997 in a move to help promote applied econometrics. Each year, two lectures are delivered on consecutive days by an eminent speaker. Our hope is that these lectures will redress the balance of many applied econometrics presentations, where a major part of the discussion is often concerned with theoretical issues, leaving little time for serious consideration of the empirical results and their interpretations. In the first of the two lectures the speaker sets up the theoretical model and discusses the econometric theory involved in estimation and testing of the model, and in the second lecture focuses wholly on the empirical results and their interpretation. We believe this is an exciting opportunity for serious consideration of empirical results in economics. Previous JAE Lecturers have been Professor James Heckman of the University of Chicago, Professor Peter C.B. Phillips of Yale University, Professor Daniel McFadden of the University of California at Berkeley, Professor Guy Laroque of the Institut National de la Statistique et des Etudes Economiques (INSEE), France, Professor Robert F. Engle of the University of California at San Diego and Stern Business School, New York University, Professor Ariel Pakes, of Harvard University, Professor Charles Manski, of Northwestern University, Professor David Hendry, of the University of Oxford, Professor John Geweke, of the University of Iowa, Professor Robert H. Porter, of Northwestern University and Professor Mark Watson, of Princeton University. http://www.cemfi.es/~arellano/JAE-conference.htm

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4. Forthcoming Articles

The Risk of Catastrophic Terrorism: An Extreme Value Approach By Hamid Mohtadi and Antu Panini Murshid

This paper models the stochastic behavior of large-scale terrorism using extreme value methods. We utilize a unique dataset composed of roughly 26,000 observations. These data provide a rich description of domestic and international terrorism between 1968 and 2006. Currently, a credible worst-case scenario would involve losses of about 5000 to 10,000 lives. Also, the return time for events of such magnitude is shortening every year. Today, the primary threat is from conventional weapons, rather than from chemical, biological and/or radionuclear weapons. However, pronounced tails in the distribution of these incidents suggest that this threat cannot be dismissed.

Rough and Lonely Road to Prosperity: A Reexamination of the Sources of Growth in Africa using Bayesian Model Averaging By Chris Papageorgiou and Winford Masanjala

This paper takes a fresh look into Africa's dismal growth performance by using the Bayesian Model Averaging (BMA) methodology. We estimate the posterior probability of a large number of potential explanatory variables and cross-country regression models. In large, we find that determinants of growth in Africa are strikingly different from the rest of the world. In addition, growth regression models that best explain global growth do poorly in explaining African growth, and conversely.

Assessing the Credibility of Instrumental Variables Inference with Imperfect Instruments By Richard Ashley



Consistent instrumental variables (IV) estimation requires instruments uncorrelated with the model errors, but this assumption is usually both suspect and untestable. Here the asymptotic sampling distribution of the IV parameter estimator is derived for any specified instrument-error covariance vector. This result makes it possible to quantify the sensitivity of any particular IV inference result to instrument-error correlations, allowing one to assess the robustness of such inferential conclusions to uncertainty in the validity of the instruments. An application illustrating the value of this sensitivity analysis is given to a study by Acemoglu et al. (2001).

On the Effect of Prior Assumptions in Bayesian Model Averaging with Applications to Growth Regression By Eduardo Ley and Mark Steel

We consider the problem of variable selection in linear regression models. Bayesian model averaging has become an important tool in empirical settings with large numbers of potential regressors and relatively limited numbers of observations. We examine the effect of a variety of prior assumptions on the inference concerning model size, posterior inclusion probabilities of regressors and on predictive performance. We illustrate these issues in the context of cross-country growth regressions using three datasets with 41 to 67 potential drivers of growth and 72 to 93 observations. Finally, we recommend priors for use in this and related contexts.

Binary Choice under Social Interactions: an Empirical Study with and without Subjective Data of Expectation By Ji Li Ohio and Lung-fei Lee

This paper examines two methods of modeling binary choice with social interactions: models assuming homogenous rational expectations and models using subjective data on expectations. Exploiting a unique survey conducted during the 1996 U.S. presidential election that was designed to study voting behavior under social context, we find that in various model specifications, using subjective expectations consistently improves models' goodness-of-fit; and that subjective expectations are not rational as formulated by Brock and Durlauf. Specifically, members' characteristics are individually important in forming expectations. We also include correlated effect into the rational expectation model. This extension provides a remedy to the selection issues that often arise in social interaction models.

Jointness of Growth Determinants By Gernot Doppelhofer and Melvyn Weeks

This paper introduces a new measure of dependence or jointness among explanatory variables. Jointness is based on the joint posterior distribution of variables over the model space, thereby taking model uncertainty into account. By looking beyond marginal measures of variable importance, jointness reveals generally unknown forms of dependence. Positive jointness implies that regressors are complements, representing distinct, but mutually reinforcing effects. Negative jointness implies that explanatory variables are substitutes and capture similar underlying effects. In a cross-country dataset we show that jointness among 67 determinants of growth is important, affecting inference and informing economic policy.

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5.Top 10 downloaded articles in 2007:



The article Multivariate GARCH models: a survey by Luc Bauwens, Sbastien Laurent, Jeroen V. K. Rombouts (published in Volume 21, Issue 1, January/February 2006) was the most downloaded in Wiley InterScience during 2007. For a list of the top 10 downloaded articles on Wiley InterScience in 2007 (with links to the abstracts online), please see the table below:

Rank Title Author(s) Vol. Issue1 Multivariate GARCH Models: A Survey Luc Bauwens, Sbastien Laurent,

Jeroen V. K. Rombouts

21 1

2 Growth, Technological Interdependence and Spatial Externalities: Theory and Evidence

Cem Ertur, Wilfried Koch 22 6

3 Applied Econometrics Rankings: 1989-1995

Badi H. Baltagi 14 4

4 Computation andAnalysis of Multiple Structural Change Models

Jushan Bai, Pierre Perron 18 1

5 Exploring the International Linkages of the Euro Area: a Global VAR Analysis Stephane Dees, Filippo di Mauro, M. Hashem Pesaran, L. Vanessa Smith

22 1

6 Does Peer Ability Affect Student Achievement? Eric A. Hanushek, John F. Kain, Jacob M. Markman, Steven G. Rivkin

18 5

7 Bounds Testing Approaches to the Analysis of Level Relationships M. Hashem Pesaran, Yongcheol Shin, Richard J. Smith

16 3

8 Simple Solutions to the Initial Conditions Problem in Dynamic, Nonlinear Panel Data Models with Unobserved Heterogeneity

Professor Jeffrey M. Wooldridge 20 1

9 A Forecast Comparison of Volatility Models: Does Anything Beat a GARCH(1, 1)?

Peter R. Hansen, Asger Lunde 20 7

10 Heterogeneity and Cross SectionDependence in Panel Data Models: Theory and Applications Introduction Badi H. Baltagi, M. Hashem Pesaran 22 2

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6. Conferences Sponsored by JAE

More than just an outlet for innovative and quantitative research in the application of econometric techniques to a wide variety of problems in economic and related fields, the Journal of Applied Econometrics also offers financial support (up to $5,000) towards the cost of organising conferences to promote research in applied econometrics. Financial Econometrics Conference (16-17 May 2008) FFM Conference (21-23 May 2008)

Festschrift Conference for Rob Engle (June 2008)

NAPW - North America (24-27 June 2008)

CEF 2008, Paris La Sorbonne (26-28 June 2008)



La Pietra-Mondragone workshop, Italy (30 June-2 July 2008)

AES Pretoria (9-11 July 2008)

MMF Annual Conference (10-12 September 2008)

International Conference on "Factor Structures for Panel and Multivariate Time Series Data" (19-20 September)

CESG - Montreal "Modeling Persistence and Dependence in Economic Data" (26-28 Sept 2008)

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7. Journal of Applied Econometrics Data Archive

The JAE Data Archive is a very important feature of the Journal of Applied Econometrics, making it possible for other researchers to replicate results of papers published in the Journal, or to evaluate alternative models. Hosted by a server belonging to the Economics Department of Queen's University, it contains data for all papers accepted after January 1994, with the exception of a growing number of papers for which the data are confidential. There are some data for a few papers accepted earlier than January 1994, but Volume 10, No. 1 (1995) is the first issue in which all papers were accepted subject to the proviso that data be provided.

For some papers, especially more recent ones, the Data Archive also contains programs and supplementary material, such as technical appendices and additional graphs. As of 9th October 2006, there were directories for 480 papers in the archive.

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8. How to publish in JAE

The Journal of Applied Econometrics is published by John Wiley & Sons Ltd. Editors: M. Hashem Pesaran, Steven Durlauf, Tim Bollerslev, Herman K van Dijk , Badi H. Baltagi, James M MacKinnon, Manuel Arellano and Edward Vytlacil. Please send letters, papers, and ideas for the journal to:

Editorial Office

Faculty of Economics University of Cambridge Sidgwick Avenue, Cambridge CB3 9DD, UK Tel: +44 (0)1223 335291 Fax: +44 (0)1223 335471 E-mail: [email protected] Website: http://jae.wiley.com/jae/



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9. Aims and Scope of JAE

The Journal of Applied Econometrics is a bi-monthly international journal which aims to publish articles of high quality dealing with the application of existing as well as new econometric techniques to a wide variety of problems in economics and related subjects, covering topics in measurement, estimation, testing, forecasting, and policy analysis. The emphasis is on the careful and rigorous application of econometric techniques and the appropriate interpretation of the results. The economic content of the articles is stressed.

The intention of the Journal of Applied Econometrics is to provide an outlet for innovative, quantitative research in economics which cuts across areas of specialization, involves transferable techniques, and is easily replicable by other researchers. Contributions that introduce statistical methods that are applicable to a variety of economic problems are actively encouraged. The Journal also aims to publish review and survey articles that make recent developments in the field of theoretical and applied econometrics more readily accessible to applied economists in general.

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10. Wiley InterScience Alerting Services

Receive the table of contents of the Journal of Applied Econometrics as soon as it publishes online. Register Free at www.interscience.wiley.com/journal/jae and click on 'Set Email Alert'

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