Common stochastic trends and aggregation in heterogeneous panels

Lazarova, S., Trapani, L. & Urga, G. (2007). Common stochastic trends and aggregation in heterogeneous panels. Econometric Theory, 23(1), pp. 89-105. doi: 10.1017/S0266466607070041

[img]
Preview
PDF - Accepted Version
Download (150kB) | Preview

Abstract

In nonstationary heterogeneous panels where the number of units is finite and where each unit cointegrates, a large number of conditions needs to be satisfied for cointegration to be preserved in the aggregate relationship. In reality, the conditions most likely will not hold. This paper takes a closer look at what happens when the conditions are violated. In this case, the question of whether an aggregate relationship is observationally equivalent to a cointegrating equation is of particular interest. We derive a measure of the degree of noncointegration of the aggregate estimates, and we explore its asymptotic properties.

Item Type: Article
Additional Information: Copyright Cambridge University Press, 2007. This version may have been revised following peer review but may be subject to further editorial input by Cambridge University Press.
Uncontrolled Keywords: Aggregation, Cointegration, Heterogeneous Panel
Subjects: H Social Sciences > HG Finance
Divisions: Cass Business School > Faculty of Finance
Related URLs:
URI: http://openaccess.city.ac.uk/id/eprint/6117

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics