Many panel data sets encountered in macroeconomics, international economics, regional science, and finance are characterized by cross-sectional or “spatial” dependence. Standard techniques that fail to account for this dependence will result in inconsistently estimated standard errors. In this paper we present conditions under which a simple extension of common nonparametric covariance matrix estimation techniques yields standard error estimates that are robust to very general forms of spatial and temporal dependence as the time dimension becomes large. We illustrate the relevance of this approach using Monte Carlo simulations and a number of empirical examples.

Nobel Lecture to the memory of Alfred Nobel, December 9, 1997. (This abstract was borrowed from another version of this item.)

We use unique data from the Medicaid program of the Commonwealth of Kentucky to examine the duration of Medicaid spells. The data set consists of a one-in-ten sample of all Medicaid recipients in Kentucky on July 1, 1986, and a similar sample of all new spells between July 1, 1986, and June 30, 1987. Because the beginning date of Medicaid recipiency is known for all spells, this mixed "stock" and "flow" sample allows us to identify the duration of Medicaid spells for up to twenty years. This is in contrast to other studies using short panels of new spells. We find significant differences in hazard functions across program eligibility categories, suggesting that the cost of expanding Medicaid or the savings from contracting it would vary depending on the eligibility group affected by the change in policy. © 1998 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog

In this paper we examine a number of recent studies that claim to have obtained a well-defined liquidity effect using structural VAR models based on broad measures of money. These studies can be distinguished in terms of the identifying restrictions, sample periods, and frequency of data used. We show that estimation of the structural coefficients of all these models can be achieved by instrumental-variable methods, where the instruments are predetermined variables and the estimated structural errors from other equations in the system. Overall, our judgment is that the evidence for a liquidity effect from these studies is much less certain than suggested in the original papers, primarily because of the poor quality of the instruments used in estimation and the sensitivity of the estimates to the sample period used.

Recent studies have provided theory and evidence that the contemporaneous relation between stock returns and accounting earnings is nonlinear, different for profits and losses, and different across firms. Since each factor can result from differences in earnings persistence, existing theory is ambiguous as to whether these factors are distinct or overlapping. Thus, we conduct a simultaneous examination. Our primary tests show that each factor explains a significant portion of the variance of returns after controlling for the other two factors, with firm-specific estimation providing the largest incremental explanatory power. Alternative tests produce similar conclusions. Empirically, the three factors are distinct.

Journal Article Openness and Inflation: A New Assessment Get access Cristina T. Terra Cristina T. Terra Pontifical Catholic University, Rio de Janeiro Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 113, Issue 2, May 1998, Pages 641–648, https://doi.org/10.1162/003355398555603 Published: 01 May 1998

This study investigates the economic consequences of rights to paid parental leave in nine European countries over the 1969 through 1993 period. Since women use virtually all parental leave in most nations, men constitute a reasonable comparison group, and most of the analysis examines how changes in paid leave affect the gap between female and male labor market outcomes. The employment-to-populations ratios of women in their prime childbearing years are also compared with those of corresponding aged men and older females. Parental leave is associated with increases in women's employment, but with reductions in their relative wages at extended durations.