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

Document Type

Conference Proceeding

Publication Date


Publication Title

2011 Joint Statistical Meetings Proceedings


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.