University of Auckland

Dynamic Seemingly Unrelated Cointegrating Regression

Email address: D.SUL@auckland.ac.nz

Keywords: Nonstationary Panel Data, Cointegration Vector Estimation, Seemingly Unrelated Regression

Abstract:
Multiple cointegrating regressions are frequently encountered in empirical work as, for example, in the analysis of panel data. When the equilibrium errors are correlated across equations, the seemingly unrelated regression estimation strategy can be applied to cointegrating regressions to obtain asymptotically efficient estimators. While non-parametric methods for seemingly unrelated cointegrating regressions have been proposed in the literature, they are not computationally straightforward. We propose Dynamic Seemingly Unrelated Regression (SUR) Estimators which can be made fully parametric and are computationally straightforward to use. We study the asymptotic and small sample properties of the dynamic SUR estimators for both heterogeneous and homogenous cointegrating vectors. The estimation techniques are then applied to analyze two long-standing problems. The ¯rst revisits whether the forward exchange rate is an unbiased predictor of the future spot rate. The second problem that we study concerns the estimation of long-run correlations between national investment and national saving.

PDF file of paper: sul.pdf

Session: Panel Data Models

Time: Saturday, 7 July, 2:15pm - 3:45pm

Room: C