Linear regression limit theory for nonstationary panel data

Peter C.B. Phillips, Hyungsik Roger Moon

Research output: Contribution to journalArticle

500 Citations (Scopus)

Abstract

This paper develops a regression limit theory for nonstationary panel data with large numbers of cross section (n) and time series (T) observations. The limit theory allows for both sequential limits, wherein T → x followed by n → x, and joint limits where T,n → x simultaneously; and the relationship between these multidimensional limits is explored. The panel structures considered allow for no time series cointegration, heterogeneous cointegration, homogeneous cointegration, and near-homogeneous cointegration. The paper explores the existence of long-run average relations between integrated panel vectors when there is no individual time series cointegration and when there is heterogeneous cointegration. These relations are parameterized in terms of the matrix regression coefficient of the long-run average covariance matrix. In the case of homogeneous and near homogeneous cointegrating panels, a panel fully modified regression estimator is developed and studied. The limit theory enables us to test hypotheses about the long run average parameters both within and between subgroups of the full population.

Original languageEnglish
Pages (from-to)1057-1111
Number of pages55
JournalEconometrica
Volume67
Issue number5
DOIs
Publication statusPublished - 1999 Jan 1

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Linear regression
Non-stationary panel data
Cointegration
Covariance matrix
Estimator
Coefficients
Hypothesis test
Cross section
Integrated

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Cite this

Phillips, Peter C.B. ; Moon, Hyungsik Roger. / Linear regression limit theory for nonstationary panel data. In: Econometrica. 1999 ; Vol. 67, No. 5. pp. 1057-1111.
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Linear regression limit theory for nonstationary panel data. / Phillips, Peter C.B.; Moon, Hyungsik Roger.

In: Econometrica, Vol. 67, No. 5, 01.01.1999, p. 1057-1111.

Research output: Contribution to journalArticle

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