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Energy consumption and GDP: a panel data analysis with multi-level cross-sectional dependence

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A fractionally integrated panel data model with a multi-level cross-sectional dependence is proposed. Such dependence is driven by a factor structure that captures comovements between blocks of variables through top-level factors, and within these blocks by non-pervasive factors. The model can include stationary and non-stationary variables, which makes it flexible enough to analyze relevant dynamics that are frequently found in macroeconomic and financial panels. The estimation methodology is based on fractionally differenced block-by-block cross-sectional averages. Monte Carlo simulations suggest that the procedure performs well in typical samples sizes. This methodology is applied to study the long-run relationship between energy consumption and economic growth. The main results suggest that estimates in some empirical studies may have some positive biases caused by neglecting the presence non-pervasive cross-sectional dependence and long-range dependence processes.

OriginalsprogEngelsk
TidsskriftEconometrics and Statistics
ISSN2468-0389
DOI
StatusAccepteret/In press - 2021
Eksternt udgivetJa

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