Cointegration versus Spurious Regression in Heterogeneous Panels

Giovanni Urga and Lorenzo Trapani ()

No 266, Econometric Society 2004 North American Summer Meetings from Econometric Society

Abstract: We consider the issue of cross sectional aggregation in nonstationary, heterogeneous panels where each unit cointegrates. We first derive the asymptotic properties of the aggregate estimate, and a necessary and sufficient condition for cointegration to hold in the aggregate relationship. We also develop an estimation and testing framework to verify whether the condition is met. Secondly, we analyze the case when cointegration doesn't carry through the aggregation process, investigating whether a mild violation can still lead to an aggregate estimator that summarizes the micro relationships reasonably well. We derive the asymptotic measure of the degree of non cointegration of the aggregated estimate and we provide estimation and testing procedures. A Monte Carlo exercise evaluates the small sample properties of the estimator.

Keywords: Aggregation; Cointegration; Heterogeneous Panel; Monte Carlo Simulation. (search for similar items in EconPapers)
JEL-codes: C12 C13 C23 (search for similar items in EconPapers)
Date: 2004-08-11
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:

Downloads: (external link)
http://repec.org/esNASM04/up.9252.1075390955.pdf (application/pdf)

Related works:
Working Paper: Cointegration Versus Spurious Regression In Heterogeneous Panels (2004)
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:ecm:nasm04:266

Access Statistics for this paper

More papers in Econometric Society 2004 North American Summer Meetings from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().