Austrian Institute of Economic Research

About: Austrian Institute of Economic Research is a nonprofit organization based out in Vienna, Austria. It is known for research contribution in the topics: European union & Productivity. The organization has 173 authors who have published 982 publications receiving 23458 citations. The organization is also known as: Österreichisches Institut für Wirtschaftsforschung.

Detrending, stylized facts and the business cycle

Abstract: The stylized facts of macroeconomic time series can be presented by fitting structural time series models. Within this framework, we analyse the consequences of the widely used detrending technique popularised by Hodrick and Prescott (1980). It is shown that mechanical detrending based on the Hodrick–Prescott filter can lead investigators to report spurious cyclical behaviour, and this point is illustrated with empirical examples. Structural time-series models also allow investigators to deal explicitly with seasonal and irregular movements that may distort estimated cyclical components. Finally, the structural framework provides a basis for exposing the limitations of ARIMA methodology and models based on a deterministic trend with a single break.

An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials

Abstract: This paper presents an AR(1) model in the spirit of Hausman and Taylor zero differences between actual and in-sample predicted trade flows. Large systematic differences between observed and in-sample predicted trade flows only indicate model misspecification and econometric problems. Out-of-sample predictions make sense if countries of interest are in an early stage of the transformation process. The gravity model remains an interesting tool for the calculation of counterfactuals (e.g. the impact of catching up in GDP per capita in the CEEC or of the reduction of trade costs via infrastructure investments or tariffs on bilateral trade, etc.). For this line of research, the difference between short-term and long-term influences could provide interesting insights.

The proper panel econometric specification of the gravity equation: A three-way model with bilateral interaction effects

Abstract: We argue that the proper specification of a panel gravity model should include main (exporter, importer, and time) as well as time invariant exporter-by-importer (bilateral) interaction effects. In a panel of 11 APEC countries, the latter are highly significant and account for the largest part of variation.