Estimation and inference of a cointegrated regression in panel data: A Monte Carlo study

Estimation and inference of a cointegrated regression in panel data: A Monte Carlo study

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Article ID: iaor20013117
Country: United States
Volume: 19
Issue: 1/2
Start Page Number: 75
End Page Number: 114
Publication Date: Jan 1999
Journal: American Journal of Mathematical and Management Sciences
Authors: , ,
Keywords: simulation: languages & programs
Abstract:

This paper studies the finite sample properties of the least squares dummy variable (LSDV) estimator and t-statistic in a cointegrated regression in panel data. Through Monte Carlo studies we find that both the LSDV estimator and the t-statistic have a small amount of bias, and the t-statistic diverges as the cross-sectional dimension increases. We also find that the bias-corrected LSDV estimator and the bias-corrected t-statistic do not reduce the magnitude of the bias problem.

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