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Original Articles

Estimation and Inference of a Cointegrated Regression in Panel Data: A Monte Carlo Study

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Pages 75-114 | Published online: 14 Aug 2013
 

SYNOPTIC 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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