On the estimation and inference of a cointegrated regression in panel data

Chihwa Kao, Min Hsien Chiang

Research output: Chapter in Book/Report/Conference proceedingChapter

675 Citations (Scopus)

Abstract

In this chapter, we study the asymptotic distributions for ordinary least squares (OLS), fully modified OLS (FMOLS), and dynamic OLS (DOLS) estimators in cointegrated regression models in panel data. We show that the OLS, FMOLS, 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 illustrate the sampling behavior of the proposed estimators and show that (1) the OLS estimator has a non-negligible bias in finite samples, (2) the FMOLS estimator does not improve over the OLS estimator in general, and (3) the DOLS outperforms both the OLS and FMOLS estimators.

Original languageEnglish
Title of host publicationNonstationary Panels, Panel Cointegration, and Dynamic Panels
PublisherJAI Press
Pages179-222
Number of pages44
ISBN (Print)0762306882, 9780762306886
DOIs
Publication statusPublished - 2000 Jan 1

Publication series

NameAdvances in Econometrics
Volume15
ISSN (Print)0731-9053

Fingerprint

Ordinary least squares
Panel data
Inference
Estimator
Least squares estimator
Asymptotic distribution
Regression model
Finite sample
Sampling

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Cite this

Kao, C., & Chiang, M. H. (2000). On the estimation and inference of a cointegrated regression in panel data. In Nonstationary Panels, Panel Cointegration, and Dynamic Panels (pp. 179-222). (Advances in Econometrics; Vol. 15). JAI Press. https://doi.org/10.1016/S0731-9053(00)15007-8
Kao, Chihwa ; Chiang, Min Hsien. / On the estimation and inference of a cointegrated regression in panel data. Nonstationary Panels, Panel Cointegration, and Dynamic Panels. JAI Press, 2000. pp. 179-222 (Advances in Econometrics).
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Kao, C & Chiang, MH 2000, On the estimation and inference of a cointegrated regression in panel data. in Nonstationary Panels, Panel Cointegration, and Dynamic Panels. Advances in Econometrics, vol. 15, JAI Press, pp. 179-222. https://doi.org/10.1016/S0731-9053(00)15007-8

On the estimation and inference of a cointegrated regression in panel data. / Kao, Chihwa; Chiang, Min Hsien.

Nonstationary Panels, Panel Cointegration, and Dynamic Panels. JAI Press, 2000. p. 179-222 (Advances in Econometrics; Vol. 15).

Research output: Chapter in Book/Report/Conference proceedingChapter

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Kao C, Chiang MH. On the estimation and inference of a cointegrated regression in panel data. In Nonstationary Panels, Panel Cointegration, and Dynamic Panels. JAI Press. 2000. p. 179-222. (Advances in Econometrics). https://doi.org/10.1016/S0731-9053(00)15007-8