Working Paper

Xtpb: The Pooled Bewley Estimator of Long Run Relationships in Dynamic Heterogeneous Panels

Abstract: This paper introduces a new Stata command, xtpb, that implements the Chudik, Pesaran and Smith (2023a) Pooled Bewley (PB) estimator of long-run relationships in dynamic heterogeneous panel-data models. The PB estimator is based on the Bewley (1979) transform of the autoregressive-distributed lag model and it is applicable under a similar setting as the widely used pooled mean group (PMG) estimator of Pesaran, Shin and Smith (1999). Two bias-correction methods and a bootstrapping algorithm for more accurate small-sample inference robust to arbitrary cross-sectional dependence of errors are also implemented. An empirical illustration reproduces the PB estimates of the consumption function as in Chudik, Pesaran and Smith (2023a).

Keywords: Pooled Bewley (PB) estimator; pooled mean group estimator (PMG); Heterogeneous dynamic panels; Autoregressive-Distributed Lag model (ARDL); cross-sectional dependence; bias-correction; bootstrap; xtpb;

JEL Classification: C12; C13; C23; C33;

https://doi.org/10.24149/gwp429

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Globalization Institute Working Papers

Publication Date: 2024-08-20

Number: 429