Estimation and Inference in Short Panel Vector Autoregressions with Unit Roots and Cointegration
Michael Binder (),
C. Hsaio and
M Pesaran ()
Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
This paper considers estimation and inference in panel vector autoregressions (PVARs) with fixed effects when the time dimension of the panel is finite, and the cross-sectional dimension is large. A Maximum Likelihood (ML) estimator based on a transformed likelihood function is proposed and shown to be consistent and asymptotically normally distributed irrespective of the unit root and cointegrating properties of the underlying PVAR model. The transformed likelihood framework is also used to derive unit root and cointegration tests in panels with short time dimension; these tests have the attractive feature that they are based on standard chi-squared and normal distributed statistics. Examining Generalised Method of Moments (GMM) estimation as an alternative to our proposed ML estimator, it is shown that conventional GMM estimators based on standard orthogonality conditions break down if the underlying time series contain unit roots.
Keywords: Panel vector autoregressions; Fixed effects; Unit roots; Cointegration (search for similar items in EconPapers)
JEL-codes: C12 C13 C33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (77) Track citations by RSS feed
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 404 Not Found
Journal Article: ESTIMATION AND INFERENCE IN SHORT PANEL VECTOR AUTOREGRESSIONS WITH UNIT ROOTS AND COINTEGRATION (2005)
Working Paper: Estimation and Inference in Short Panel Vector Autoregressions with Unit Roots and Cointegration (2001)
Working Paper: Estimation and Inference in Short Panel Vector Autoregressions with Unit Roots and Cointegration (2000)
Working Paper: Estimation and Inference In Short Panel Vector Autoregressions with Unit Roots And Cointegration (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:0003
Access Statistics for this paper
More papers in Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
Bibliographic data for series maintained by Jake Dyer ().