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Testing poolability in a system of dynamic regressions with nonspherical disturbances

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  • Maurice J.G. Bun

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Abstract

This study analyzes the testing of cross-equation restrictions within a set of regression equations. Through Monte Carlo experiments we examine the actual size of various asymptotic procedures for testing the poolability hypothesis, i.e., equal slope vectors across individual equations. Regression models with both lagged dependent variable regressors and nonspherical disturbances are considered. In these models we find that the performance in finite samples of classical asymptotic test procedures using critical values from either ℱ or χ 2 approximations is often rather poor. However, employing the original test statistics with bootstrapped critical values leads to much more accurate inference in finite samples. In an empirical analysis of panel data on GDP growth and unemployment rates in OECD countries it is shown that classical asymptotic tests and bootstrap procedures may lead to conflicting test outcomes. Copyright Springer-Verlag 2004

Suggested Citation

  • Maurice J.G. Bun, 2004. "Testing poolability in a system of dynamic regressions with nonspherical disturbances," Empirical Economics, Springer, vol. 29(1), pages 89-106, January.
  • Handle: RePEc:spr:empeco:v:29:y:2004:i:1:p:89-106
    DOI: 10.1007/s00181-003-0191-3
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    Citations

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    Cited by:

    1. Kerstin Bernoth & Andrew Hughes Hallet & John Lewis, 2008. "Did fiscal policy makers know what they were doing? Reassessing fiscal policy with real-time data," DNB Working Papers 169, Netherlands Central Bank, Research Department.
    2. Johan Blomquist & Joakim Westerlund, 2016. "Panel bootstrap tests of slope homogeneity," Empirical Economics, Springer, vol. 50(4), pages 1359-1381, June.
    3. Cosmin Enache, 2013. "Family and Childcare Support Public Expenditures and Short-Term Fertility Dynamics," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(3), pages 347-364, May.
    4. Hashem Pesaran, M. & Yamagata, Takashi, 2008. "Testing slope homogeneity in large panels," Journal of Econometrics, Elsevier, vol. 142(1), pages 50-93, January.
    5. Blomquist, Johan & Westerlund, Joakim, 2013. "Testing slope homogeneity in large panels with serial correlation," Economics Letters, Elsevier, vol. 121(3), pages 374-378.
    6. Serhan Cevik & Katerina Teksoz, 2014. "Deep Roots of Fiscal Behavior," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 2(2), pages 5-33, November.

    More about this item

    Keywords

    Bootstrap; dynamic regression model; panel data; poolability; test size; C12; C23;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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