A Parametric approach to the Estimation of Cointegration Vectors in Panel Data

Jörg Breitung ()

Econometric Reviews, 2005, vol. 24, issue 2, 151-173

Abstract: In this article, a parametric framework for estimation and inference in cointegrated panel data models is considered that is based on a cointegrated VAR(p) model. A convenient two-step estimator is suggested where, in the first step, all individual specific parameters are estimated, and in the second step, the long-run parameters are estimated from a pooled least-squares regression. The two-step estimator and related test procedures can easily be modified to account for contemporaneously correlated errors, a feature that is often encountered in multi-country studies. Monte Carlo simulations suggest that the two-step estimator and related test procedures outperform semiparametric alternatives such as the fully modified OLS approach, especially if the number of time periods is small.

Keywords: Cointegrated systems; Estimation; Inference; Panel data (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (245)

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Working Paper: A parametric approach to the estimation of cointegration vectors in panel data (2002)
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DOI: 10.1081/ETC-200067895

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