Cointegration Vector Estimation by Panel DOLS and Long‐run Money Demand

Nelson Mark and Donggyu Sul ()

Oxford Bulletin of Economics and Statistics, 2003, vol. 65, issue 5, 655-680

Abstract: We study the panel dynamic ordinary least square (DOLS) estimator of a homogeneous cointegration vector for a balanced panel of N individuals observed over T time periods. Allowable heterogeneity across individuals include individual‐specific time trends, individual‐specific fixed effects and time‐specific effects. The estimator is fully parametric, computationally convenient, and more precise than the single equation estimator. For fixed N as T→∞, the estimator converges to a function of Brownian motions and the Wald statistic for testing a set of s linear constraints has a limiting χ2(s) distribution. The estimator also has a Gaussian sequential limit distribution that is obtained first by letting T→∞ and then letting N→∞. In a series of Monte‐Carlo experiments, we find that the asymptotic distribution theory provides a reasonably close approximation to the exact finite sample distribution. We use panel DOLS to estimate coefficients of the long‐run money demand function from a panel of 19 countries with annual observations that span from 1957 to 1996. The estimated income elasticity is 1.08 (asymptotic s.e. = 0.26) and the estimated interest rate semi‐elasticity is −0.02 (asymptotic s.e. = 0.01).

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (431)

Downloads: (external link)
https://doi.org/10.1111/j.1468-0084.2003.00066.x

Related works:
Working Paper: Cointegration Vector Estimation by Panel DOLS and Long-Run Money Demand (2002)
Software Item: RATS programs to replicate Mark-Sul(2003) panel DOLS
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:obuest:v:65:y:2003:i:5:p:655-680

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0305-9049

Access Statistics for this article

Oxford Bulletin of Economics and Statistics is currently edited by Christopher Adam, Anindya Banerjee, Christopher Bowdler, David Hendry, Adriaan Kalwij, John Knight and Jonathan Temple

More articles in Oxford Bulletin of Economics and Statistics from Department of Economics, University of Oxford Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().