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Demeaning the data in panel-cointegration models to control for cross-sectional dependencies

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  • Solberger, Martin

Abstract

The literature on panel-cointegration has suggested demeaning the data to control for a cross-sectional dependence. This paper demonstrates that this routine works well on exogenous common components but not as well on endogenous common cross-correlations.

Suggested Citation

  • Solberger, Martin, 2011. "Demeaning the data in panel-cointegration models to control for cross-sectional dependencies," Economics Letters, Elsevier, vol. 110(3), pages 252-254, March.
    • Handle: RePEc:eee:ecolet:v:110:y:2011:i:3:p:252-254
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    1. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
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    5. Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
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    7. repec:bla:obuest:v:61:y:1999:i:0:p:653-70 is not listed on IDEAS
    8. László Mátyás & Patrick Sevestre (ed.), 2008. "The Econometrics of Panel Data," Advanced Studies in Theoretical and Applied Econometrics, Springer, number 978-3-540-75892-1.
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