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: | Chen Bangtian, McCoskey Suzanne K., Kao Chihwa |
Keywords: | simulation: languages & programs |
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.