Estimation and inference of a cointegrated regression in panel data: A monte carlo study

Bangtian Chen, Suzanne K. Mc Coskey, Chihwa Kao

Research output: Contribution to journalArticle

41 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)75-114
Number of pages40
JournalAmerican Journal of Mathematical and Management Sciences
Volume19
Issue number1-2
DOIs
StatePublished - Jan 1 1999

Keywords

  • Cointegration
  • Monte Carlo simulation
  • Panel data

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Applied Mathematics

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