Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2003:12: Feasible Estimation in Cointegrated Panels

Joakim Westerlund ()
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Joakim Westerlund: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: In this paper we propose a simple procedure for data dependent determination of the number of lags and leads to use in feasible estimation of cointegrated panel regressions. Results from Monte Carlo simulations suggests that the feasible estimators considered enjoys excellent precision in terms of root mean squared error and reasonable power with effective size hovering close to the nominal level. The good performance of the feasible estimators is verified empirically through an application to the long run money demand.

Keywords: Panel Cointegration Estimation; Monte Carlo Simulation

JEL-codes: C13; C15; C33; C82

8 pages, First version: August 16, 2003. Revised: November 10, 2003.

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