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

24 Pages Posted: 13 May 1997

See all articles by Chihwa Kao

Chihwa Kao

Syracuse University

Min-Hsien Chiang

National Cheng Kung University - Institute of International Business

Multiple version iconThere are 2 versions of this paper

Date Written: February 27, 1997

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.

JEL Classification: C12, C22, C23, C32, C33

Suggested Citation

Kao, Chihwa D. and Chiang, Min-Hsien, On the Estimation and Inference of a Cointegrated Regression in Panel Data (February 27, 1997). Available at SSRN: https://ssrn.com/abstract=2379 or http://dx.doi.org/10.2139/ssrn.2379

Chihwa D. Kao (Contact Author)

Syracuse University ( email )

900 S. Crouse Avenue
426 Eggers Hall Maxwell School of Citizenship and Public Affairs
Syracuse, NY 13244
United States
315-443-3233 (Phone)
315-443-1081 (Fax)

Min-Hsien Chiang

National Cheng Kung University - Institute of International Business ( email )

1 University Rd.
Tainan, 70101
Taiwan

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