Estimating Cointegrating Relations from a Cross Section

Edith Madsen
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Edith Madsen: Institute of Economics, University of Copenhagen

No 2004-21, CAM Working Papers from University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics

Abstract: This paper specifies a regression model describing cointegrating relations between variables at the individual level. The models considered allow for homogeneous cointegration and heterogeneous cointegration. In both cases correlation between the regressors and the regression error can occur through aggregate shocks that are common to all cross-section units so the condition about the regressors being independent of the regression error is not imposed. It is shown that the estimator obtained by a cross-section regression performed at any point in time is a consistent estimator of the cointegrating parameters in the homogeneous case and of the cointegrating parameter means in the heterogeneous case. In both cases the limiting distribution of the cross-section estimator is normal.

Keywords: dynamic panel data models; non-stationary panel data; cointegrating relations; cross-section regression (search for similar items in EconPapers)
JEL-codes: C31 C32 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2004-11
New Economics Papers: this item is included in nep-ecm and nep-ets
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