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Estimating Cointegrating Relations from a Cross Section

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  • Edith Madsen

    (Institute of Economics, University of Copenhagen)

Abstract

This paper specifies a regression model describing cointegrating relations between variables at the individual level. The models considered allow for homogeneous cointegration and heterogeneous cointegration. In both cases correlation between the regressors and the regression error can occur through aggregate shocks that are common to all cross-section units so the condition about the regressors being independent of the regression error is not imposed. It is shown that the estimator obtained by a cross-section regression performed at any point in time is a consistent estimator of the cointegrating parameters in the homogeneous case and of the cointegrating parameter means in the heterogeneous case. In both cases the limiting distribution of the cross-section estimator is normal.

Suggested Citation

  • Edith Madsen, 2004. "Estimating Cointegrating Relations from a Cross Section," CAM Working Papers 2004-21, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
    • Handle: RePEc:kud:kuieca:2004_21
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    File URL: http://www.econ.ku.dk/cam/wp0910/wp0203/2004-21.pdf/
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    More about this item

    Keywords

    dynamic panel data models; non-stationary panel data; cointegrating relations; cross-section regression;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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