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Fully Modified Least Squares Estimation and Inference for Systems of Cointegrating Polynomial Regressions

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  • Wagner, Martin

    (Department of Economics University of Klagenfurt, Austria, Bank of Slovenia Ljubljana, Slovenia and Institute for Advanced Studies Vienna, Austria)

Abstract

We consider fully modified least squares estimation for systems of cointegrating polynomial regressions, i. e., systems of regressions that include deterministic variables, integrated processes and their powers as regressors. The errors are allowed to be correlated across equations, over time and with the regressors. Whilst, of course, fully modified OLS and GLS estimation coincide – for any regular weighting matrix – without restrictions on the parameters and with the same regressors in all equations, this equivalence breaks down, in general, in case of parameter restrictions and/or different regressors across equations. Consequently, we discuss in detail restricted fully modified GLS estimators and inference based upon them.

Suggested Citation

  • Wagner, Martin, 2023. "Fully Modified Least Squares Estimation and Inference for Systems of Cointegrating Polynomial Regressions," IHS Working Paper Series 44, Institute for Advanced Studies.
    • Handle: RePEc:ihs:ihswps:44
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    File URL: https://irihs.ihs.ac.at/id/eprint/6431
    File Function: First version, 2023
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    Cited by:

    1. Yugang He, 2024. "E-commerce and foreign direct investment: pioneering a new era of trade strategies," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-14, December.

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    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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