Dynamic Seemingly Unrelated Cointegrating Regression
39 Pages Posted: 5 Apr 2003 Last revised: 21 Apr 2023
Date Written: April 2003
Abstract
Multiple cointegrating regressions are frequently encountered in empirical work as, for example, in the analysis of panel data. When the equilibrium errors are correlated across equations, the seemingly unrelated regression estimation strategy can be applied to cointegrating regressions to obtain asymptotically ecient estimators. While non-parametric methods for seemingly unrelated cointegrating regressions have been proposed in the literature, in practice, specification of the estimation problem is not always straightforward. We propose Dynamic Seemingly Unrelated Regression (DSUR) estimators which can be made fully parametric and are computationally straightforward to use. We study the asymptotic and small sample properties of the DSUR estimators both for heterogeneous and homogenous cointegrating vectors. The estimation techniques are then applied to analyze two long-standing problems in international economics. Our first application revisits the issue of whether the forward exchange rate is an unbiased predictor of the future spot rate. Our second application revisits the problem of estimating long-run correlations between national investment and national saving.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
A Simple Panel Unit Root Test in the Presence of Cross Section Dependence
-
A Panic Attack on Unit Roots and Cointegration
By Jushan Bai and Serena Ng
-
Nonstationary Panels, Cointegration in Panels and Dynamic Panels: A Survey
By Badi H. Baltagi and Chihwa Kao
-
Dynamic Panel Estimation and Homogeneity Testing Under Cross Section Dependence
By Peter C. B. Phillips and Donggyu Sul
-
Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure
-
Testing for a Unit Root in Panels with Dynamic Factors
By Hyungsik Roger Moon and Benoit Perron
-
Testing for a Unit Root in Panels with Dynamic Factors
By Hyungsik Roger Moon and Benoit Perron
-
General Diagnostic Tests for Cross Section Dependence in Panels