On the Estimation and Inference of a Cointegrated Regression in Panel Data

Chihwa Kao and Min-Hsien Chiang
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Min-Hsien Chiang: Syracuse University

Econometrics from University Library of Munich, Germany

Abstract: In this paper, we study the asymptotic distributions for least-squares (OLS), fully modified (FM), and dynamic OLS\ (DOLS) estimators in cointegrated regression models in panel data. We show that the OLS, FM, and DOLS estimators are all asymptotically normally distributed. However, the asymptotic distribution of the OLS estimator is shown to have a non-zero mean. Monte Carlo results examine the sampling behavior of the proposed estimators and show that (1) the OLS estimator has a non-negligible bias in finite samples, (2) the FM estimator does not improve over the OLS estimator in general, and (3) the DOLS out-performs both the OLS and FM estimators.

Keywords: Panel Data, OLS Estimator; FM Estimator, DOLS Estimator, Heterogeneous Panels. (search for similar items in EconPapers)
JEL-codes: C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Pages: 24 pages
Date: 1997-03-15
Note: Type of Document - Tex (DVI); prepared on IBM PC ; to print on HP/PostScrip; pages: 24 ; figures: 0
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Citations: View citations in EconPapers (24)

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Related works:
Working Paper: On the Estimation and Inference of a Cointegrated Regression in Panel Data (1999)
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