 Panel cointegration with global stochastic trendsJushan Bai, Chihwa Kao and Serena Ng () Journal of Econometrics, 2009, vol. 149, issue 1, 82-99 Abstract: This paper studies estimation of panel cointegration models with cross-sectional dependence generated by unobserved global stochastic trends. The standard least squares estimator is, in general, inconsistent owing to the spuriousness induced by the unobservable I(1) trends. We propose two iterative procedures that jointly estimate the slope parameters and the stochastic trends. The resulting estimators are referred to respectively as CupBC (continuously-updated and bias-corrected) and the CupFM (continuously-updated and fully-modified) estimators. We establish their consistency and derive their limiting distributions. Both are asymptotically unbiased and (mixed) normal and permit inference to be conducted using standard test statistics. The estimators are also valid when there are mixed stationary and non-stationary factors, as well as when the factors are all stationary. Keywords: Panel; data; Common; shocks; Co-movements; Cross-sectional; dependence; Factor; analysis; Fully-modified; estimator (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:149:y:2009:i:1:p:82-99 Access Statistics for this article Journal of Econometrics is currently edited by T. Amemiya, A. R. Gallant, J. F. Geweke, C. Hsiao and P. M. Robinson More articles in Journal of Econometrics from Elsevier |
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