Title

A Dynamic OLS Estimator for Panel Cointegration with Global Stochastic Trends and Heterogeneous Panel

Document Type

Conference Proceeding

Publication Date

8-3-2011

Publication Title

2011 Joint Statistical Meetings Proceedings

Abstract

This paper studies the estimation of panel cointegration models with cross-sectional dependence generated by unobserved global stochastic trends. We extend the CupFM (continuously updated and fully modified) estimators studied by Bai et al. (2009) by allowing cross-sectional heterogeneity. To remove the endogeneity caused by the cointegrated triangular system, we consider the Continuously Updated Dynamic OLS (CupDOLS). The consistent limiting distribution of the estimators is derived.