Many econometric testing problems involve nuisance parameters which are not identified under the null hypotheses. This paper studies the asymptotic distribution theory for such tests. The asymptotic distributions of standard test statistics are described as functionals of chi-square processes. In general, the distributions depend upon a large number of unknown parameters. We show that a transformation based upon a conditional probability measure yields an asymptotic distribution free of nuisance parameters, and we show that this transformation can be easily approximated via simulation. The theory is applied to threshold models, with special attention given to the so-called self-exciting threshold autoregressive model. Monte Carlo methods are used to assess the finite sample distributions. The tests are applied to U.S. GNP growth rates, and we find that Potter's (1995) threshold effect in this series can be possibly explained by sampling variation.

A new asymptotic theory of regression is introduced for possibly nonstationary time series. The regressors are assumed to be generated by a linear process with martingale difference innovations. The conditional variances of these martingale differences are specified as autoregressive stochastic volatility processes with autoregressive roots that are local to unity. The author finds conditions under which the least squares estimates are consistent and asymptotically normal. A simple adaptive estimator is proposed which achieves the same asymptotic distribution as the generalized least squares estimator without requiring parameter assumptions for the stochastic volatility process. Copyright 1995 by The Econometric Society.

Current debate on monetary and fiscal policies is much concerned with the effects of such policies, and of changes in the budget and money supply. I propose here to discuss some taxonomic problems related to the concept of policy effects. Their resolution bears directly upon the controversy between Keynesians and Monetarists. I shall show that it is largely a sham-dispute, and it will appear that the empirical findings of the Monetarists have little relation to the Keynesian creed. Even negative effects of the budget with strong positive effects of money supply are fully consistent with strong positive effects of fiscal action and weak or strong effects of monetary action. The examination of the concept of effects of economic policy will be undertaken in relation to a model that is specified so as to include both the conventional Keynesian set-up for determining effective demand, and a credit mechanism that links effective demand to the banking system in the spirit of the Monetarists

Abstract We propose a new model of internal migration, based on persistent and spatially correlated idiosyncratic utility. The model is motivated by a new fact in the data that simple moving cost models struggle to match: the t-year interstate migration rate is proportional to the square root of t. The new model maintains the tractability and flexibility of standard migration models, but better matches the dynamics of migration, including the new fact. It has substantially different welfare implications and makes different counterfactual predictions, especially in terms of dynamic adjustment and long-run responses.