Bai, Jushan; Kao, Chihwa; Ng, Serena - Center for Policy Research, Maxwell School - 2007
This paper studies estimation of panel cointegration models with cross-sectional dependence generated by unobserved global stochastic trends. The standard least squares estimator is, in general, inconsistent owing to the spuriousness induced by the unobservabla I(1) trends. We propose two...