Journal Article

Dynamic Seemingly Unrelated Cointegrating Regressions

Nelson C. Mark, Masao Ogaki and Donggyu Sul

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 72, issue 3, pages 797-820
Published in print July 2005 | ISSN: 0034-6527
Published online July 2005 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/j.1467-937X.2005.00352.x
Dynamic Seemingly Unrelated Cointegrating Regressions

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  • Multiple or Simultaneous Equation Models; Multiple Variables
  • International Finance

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We propose the parametric Dynamic Seemingly Unrelated Regression (DSUR) estimator for simultaneous estimation of multiple cointegrating regressions. DSUR is efficient when the equilibrium errors are correlated across equations and is applicable for panel cointegration estimation in environments where the cross section is small relative to the available time series. We study the asymptotic and small sample properties of the DSUR estimator for both heterogeneous and homogeneous cointegrating vectors. We then apply the method to analyse two long-standing problems in international economics. Our first application revisits the estimation of long-run correlations between national investment and national saving. Our second application revisits the question of whether the forward exchange rate is an unbiased predictor of the future spot rate.

Keywords: C32; F31; F32

Journal Article.  9443 words.  Illustrated.

Subjects: Multiple or Simultaneous Equation Models; Multiple Variables ; International Finance

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