Between-group dependence in PPP equations and its causes: a principal components approach

Coakley, Jerry and Fuertes, A.-M. and Smith, Ron P. (2001) Between-group dependence in PPP equations and its causes: a principal components approach. Computing in Economics and Finance 140 ,

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Abstract

Principal components of the residuals are proposed for analysing between-group dependence when estimating PPP equations in large-T, large-N panels. If this dependence arises because omitted variables are correlated with included variables, the appropriate response to between-group dependences may not be GLS. Instead estimating the factors that account for the covariances between groups may help to suggest relevant omitted variables that can be included in the model. The approach is applied to four PPP panels of 17 OECD countries for the 1973:1-1998:12 period.

Metadata

Item Type:	Article
School:	Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
Depositing User:	Sarah Hall
Date Deposited:	27 Oct 2020 17:27
Last Modified:	02 Aug 2023 18:04
URI:	https://eprints.bbk.ac.uk/id/eprint/41082

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