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On the Estimation and Inference of a Cointegrated Regression in Panel Data

Author

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  • Chihwa Kao

    (Syracuse University)

  • Min-Hsien Chiang

    (Syracuse University)

Abstract

In this paper, we study the asymptotic distributions for least-squares (OLS), fully modified (FM), and dynamic OLS\ (DOLS) estimators in cointegrated regression models in panel data. We show that the OLS, FM, and DOLS estimators are all asymptotically normally distributed. However, the asymptotic distribution of the OLS estimator is shown to have a non-zero mean. Monte Carlo results examine the sampling behavior of the proposed estimators and show that (1) the OLS estimator has a non-negligible bias in finite samples, (2) the FM estimator does not improve over the OLS estimator in general, and (3) the DOLS out-performs both the OLS and FM estimators.

Suggested Citation

  • Chihwa Kao & Min-Hsien Chiang, 1997. "On the Estimation and Inference of a Cointegrated Regression in Panel Data," Econometrics 9703001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpem:9703001
    Note: Type of Document - Tex (DVI); prepared on IBM PC ; to print on HP/PostScrip; pages: 24 ; figures: 0
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Panel Data; OLS Estimator; FM Estimator; DOLS Estimator; Heterogeneous Panels.;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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