A Note On Spurious Regression In Panels With Cross-Section Dependence
AbstractThis paper analyses regression of two independent stationary panels with cross-sectional dependence. It is shown that the pooling least squares (PLS) estimator converges to zero in probability while the individual OLS estimator converges to a random variable. However, the PLS-based and the OLS-based t-statistics diverge, so the null hypothesis of no correlation tends to be spuriously rejected.
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Bibliographic InfoPaper provided by Massey University, Department of Applied and International Economics in its series Discussion Papers with number 23712.
Date of creation: 2003
Date of revision:
Research Methods/ Statistical Methods;
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