Fully Modified OLS for Heterogeneous Cointegrated Panels

Peter Pedroni

No 2000-03, Department of Economics Working Papers from Department of Economics, Williams College

Abstract: This chapter uses fully modified OLS principles to develop new methods for estimating and testing hypotheses for cointegrating vectors in dynamic panels in a manner that is consistent with the degree of cross sectional heterogeneity that has been permitted in recent panel unit root and panel cointegration studies. The asymptotic properties of various estimators are compared based on pooling along the "within" and "between" dimensions of the panel. By using Monte Carlo simulations to study the small sample properties, the group mean estimator is shown to behave well even in relatively small samples under a variety of scenarios.

Pages: 38 pages
Date: 2000-08
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Citations: View citations in EconPapers (6)

Published in Recent developments in the econometrics of panel data. Volume 1, 424-461. Elgar Reference Collection. International Library of Critical Writings in Econometrics, vol. 9., 2002.

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Software Item: PANELFM: RATS procedure to perform panel data group mean FMOLS
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