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Spillovers on the mean and tails: a semiparametric dynamic panel modeling approach

Published online by Cambridge University Press:  13 January 2025

Yu-Fan Huang ,
Taining Wang Open the ORCID record for Taining Wang [Opens in a new window]  and
Subal Kumbhakar
Yu-Fan Huang
Affiliation:
International School of Economics and Management, Capital University of Economics and Business, Beijing, China
Taining Wang*
Affiliation:
International School of Economics and Management, Capital University of Economics and Business, Beijing, China
Subal Kumbhakar
Affiliation:
Department of Economics, Binghamton University, NY, USA Inland Norway University of Applied Sciences, Lillehammer, Norway
*
Corresponding author: Taining Wang; Email: taining.wang@cueb.edu.cn
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Abstract

Recently, there has been a surge in interest in exploring how common macroeconomic factors impact different economic results. We propose a semiparametric dynamic panel model to analyze the impact of common regressors on the conditional distribution of the dependent variable (global output growth distribution in our case). Our model allows conditional mean, variance, and skewness to be influenced by common regressors, whose effects can be nonlinear and time-varying driven by contextual variables. By incorporating dynamic structures and individual unobserved heterogeneity, we propose a consistent two-step estimator and showcase its attractive theoretical and numerical properties. We apply our model to investigate the impact of US financial uncertainty on the global output growth distribution. We find that an increase in US financial uncertainty significantly shifts the output growth distribution leftward during periods of market pessimism. In contrast, during periods of market optimism, the increased uncertainty in the US financial markets expands the spread of the output growth distribution without a significant location change, indicating increased future uncertainty.

Keywords

Common regressorsnonlinear effectsemiparametric modeldynamicsskewed errorfixed effectsC14C33E32
Type
Articles
Information
Macroeconomic Dynamics , First View , pp. 1 - 20
Copyright
© The Author(s), 2025. Published by Cambridge University Press

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