Estimation and Inference of a Cointegrated Regression in Panel Data: A Monte Carlo Study
- 1 January 1999
- journal article
- research article
- Published by Taylor & Francis Ltd in American Journal of Mathematical and Management Sciences
- Vol. 19 (1), 75-114
- https://doi.org/10.1080/01966324.1999.10737475
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.Keywords
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