Working Papers

Speculative bubble or market forces? Some remarks on the recent agricultual commodity prices boom and burst. (January 2010) (in italian). VAR analysis and dataset.

Food price convergence : disentangling common and country-specific effects (with Cristina Brasili and Roberto Fanfani, March 2009)

Change in persistence tests for panels  (with Roy Cerqueti and Mauro Costantini, October 2007) (see also Economics & Statistics Discussion Papers, Università del Molise)

Forecasting regional GDP in Italy (February 2007), (see also Discussion Papers RegiosS )

Price index convergence among United States Cities : New results (June 2006)

Regional  convergence across European Union (with Cristina Brasili, February 2004)

PPP May not Hold for Agricultural Commodities (September 2003)

A Note on Common Trends and Convergence. (April 2003)

Common and idiosyncratic shocks to labor productivity across sectors and countries: Is climate relevant? (February 2003)

 


Food price convergence : disentangling common and country-specific effects

(March 2009)

Abstract

In the paper we show that food prices dynamics can be usefully decomposed into a common component, i.e. aggregate, and an idiosyncratic, i.e. country-specific, component. Using this decomposition, we analyze the relative food prices convergence toward purchasing power parity for a set of food consumer products during the period 1996.1-2008.12 and for two groups of countries located into the “Euro-zone” and “non-Euro-zone” area. The main results are first that food prices convergence varies across products and countries. Second, “Euro-zone” countries have a higher rate of convergence than the “non-Euro-zone” countries. Third, the common component is much more important than the idiosyncratic component in explaining food prices convergence.

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Change in persistence tests for panels

(October 2007)

Abstract

In this paper we propose a set of new panel tests to detect changes in persistence. These statistics are used to test the null hypothesis of stationarity against the alternative of a change in persistence from I(0) to I(1) or viceversa. Alternative of unknown direction is also considered. The limiting distributions of the
panel tests are derived and small sample properties are investigated by Monte Carlo experiments under the hypothesis that the individual series are cross-sectionally independently distributed. These tests have a good size and power properties. Cross-sectional dependence is also considered. A procedure of de-factorizing proposed by Stock and Watson (2002) is applied. Monte Carlo analysis is conducted and the defactored panel tests show to have good size and power. The empirical results obtained from applying these tests to a panel covering 15 European countries between 1970 and 2006 suggest that inflation rate changes from I(1) to I(0) when cross-correlation is considered.

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Forecasting regional GDP in Italy

(February 2007)

Abstract

This paper explores the usefulness of factor and bootstrap aggregation forecasting in predicting regional GDP in Italy. We use methods designed to target the set of potential predictors. We compute the mean square forecasting error (MSE) by using direct multi-step forecasts for the period 2004-2005. Our findings can be summarized as follows. First, factor and bagging forecasts generally show lower mean square forecasting error than the mean square error of the autoregressive AR(3) model used as a benchmark. Secondly, bagging methods seem to produce similar MSE as factor augmented models, especially for predicting aggregate GDPs. In synthesis, our analysis shows that using factors and bagging methods reduces the prediction mean squared error relative to standard forecasting methods.

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Price index convergence among United States Cities: New Results

(June 2006)

Abstract

In this paper we analyze the important question raised by Cecchetti et al. (2002) on whether price indices for major U.S. cities share a common trend, and, if so, how quickly they revert to that trend following a local shock. Using recent methodologies on panel nonstationary analysis, we are able to decompose the local price dynamics into common and idiosyncratic components. We show, using the same dataset as Cecchetti et al. (2002), that the idiosyncratic component is stationary and that this accounts for a small percentage of the total variance of local prices. Summing-up, on average more than 95% of the total variance is accounted for by the common component. After a shock, local price levels among cities mean revert to a higher rate than those estimated by Cecchetti et al. (2002). Finally we report that the aggregate consumer price index can be linked to the common component. All these findings may explain why monetary policy makers target consumer price inflation in measurements of aggregate inflation, as the European Central Bank has done with the Harmonized Index of Consumer Prices in recent years, and put less emphasis on the behavior of local price indices.

Key words: Local price index, Panel nonstationary analysis, Common trends.

JEL Classification: C2, C3, C5.

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Regional convergence across European Union

(with Cristina Brasili, February 2004)

Abstract

This paper analyzes the per-capita incomes convergence process across 140 NUTS2 European regions during the period 1980-1999. Two methods of analysis have been used. The first adopts the non parametric method proposed by Quah (1996, 1997) to study whether the cross-regions income distribution shows evidence of convergence, i.e a tendency for the steady-state distribution to cluster around  one or more poles of attraction, or divergence. The second uses panel unit root tests for cross-sectionally correlated panels. Unlike other studies, we find evidence of convergence among the EU regions. When looking at the distribution of  per-capita income,  we show that  it converges toward the average pole, without convergence clubs emerging. Panel unit root tests strongly reject the null of divergence for the full sample of regions and evidence is also provided for two regional subgroups.  

Key words : Convergence, Distribution dynamics, Panel unit root tests

JEL classification:  C22, C23, O41, O47.

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PPP May not Hold for Agricultural Commodities

Abstract

We use the well known USDA dataset of real exchange rates to address the question of whether PPP holds for agricultural commodities. Both unit root tests and the recently proposed more powerful class of panel unit root tests, which take into account cross-section correlation across the units in the panel, are used. Properties of unit roots and panel tests are analyzed by Monte Carlo simulation. Summarizing, our results show that during the post-Bretton-Woods period of flexible exchange rates, PPP does not hold for agricultural commodities.

Key words : Purchasing Power Parity, Agricultural Commodities, Monte Carlo, Unit Root tests, Panel unit root tests.

JEL classification:  F14, F31, C22, C23.

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A Note on Common Trends and Convergence. 

Abstract

In the following note, we briefly review the literature on convergence, focusing our attention on empirical issues. During the last decades, using different cross-sectional, time series, and panel empirical models, a growing number of studies have analysed whether poor countries converge towards richer countries.  Many recently supplied empirical models suffer from the strong hypotheses that the speed of convergence over time and across countries and the growth rate of technological progress across countries are homogeneous. In this note, we show how different speeds of convergence across countries may not influence convergence, but homogeneity of the technological growth rate over time and across countries is required if the possibility of divergence is to be ruled out. We follow three different approaches to assess the presence of convergence or divergence of real per-capita output. The approaches are essentially based on common trend analysis. All the methods show that countries real per capita income or labour productivity computed across sectors do not converge.

Key words: Common trends, Convergence, Dynamic factors

JEL classification:  C23, O47, O57.

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Power Point presentation  :     zipped- ppt-file


Common and idiosyncratic shocks to labor productivity across sectors and countries: Is climate relevant?

Abstract

We use two methodologies, the least square dummy variables approach and the dynamic factor models, to decompose the labor productivity growth rate for a large sample of countries into common, i.e. global, and idiosyncratic, i.e. country, components. We find that country specific effects are much more important than common effects in explaining labor productivity. The interesting result is that, when splitting the sample of countries into those located in temperate zones and those located in tropical zones, we find that the common component plays a larger role in temperate countries. Thus, given the wide gap in labor productivity between the two climatic zones, policy should be targeted on developing technologies for tropical zones and/or on helping them to absorb R&D targeted for temperate countries

Key words: Labor productivity, Decomposition, Dynamic factors, Panel unit roots.

JEL classification:  C23, O47, O57.

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