To Pool or to Aggregate? Tests with a Dynamic Panel Macroeconometric Model of Australian State Labour Markets

Kausik Chaudhuri and Jeffrey Sheen

No 1, Working Papers from University of Sydney, School of Economics

Abstract: We construct a dynamic error correction model of the Australian labour market using a macroeconomic panel across seven states from 1972:3 to 1999:1. Long run equilibrium estimates support a real wage-productivity gap and an unemployment gap. The dynamic short-run estimates support expectations-augmented Phillips curves for wages and prices, and Keynesian demand-led employment growth. We compare three procedures - pooled, aggregate and mean group estimates. Considerable heterogeneity existed across states in the pooled procedure, and state-level variables had a significant impact in the aggregate procedure. Out-of-sample aggregate forecasting for the pooled, aggregate and mean group procedures indicate that the pooled one performs best.

Keywords: Panel cointegration; panel macroeconometric modelling; Australian state labour markets; aggregation (search for similar items in EconPapers)
Date: 2003-02
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Citations: View citations in EconPapers (2)

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Journal Article: To Pool or to Aggregate? Tests with a Dynamic Panel Macroeconometric Model of Australian State Labor Markets (2007)
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