I want do determine a long-short run relationship, direction of causality between trade openness and economic growth. I use stata but ECM model works for time series data while for panel data it seems not to be working (maybe other commands should be used or installed). Can anyone help me with this issue please? or suggest something else?
Dear Davron, you can to see xtwest and read "Error-correction–based cointegration tests for panel data", The Stata Journal (2008), 8, Number 2, pp. 232–241
Thank You Marcos very much for your answer but these paper does not explain how to do Granger or Johansen type causality test to understand the direction of causation. It test for existence of cointegration. Do you now how to run ECM for panel data and test for causality?
Thanks
Apologies if this is old news, but try this paper for a Stata user-written programme and excellent discussion of how to use it and interpret the results. Blackburne, E. F. and Frank, M. W. (2007), Estimation of Nonstationary Heterogeneous Panels, The Stata Journal, Vol. 7 (2), pp. 197-208. This is a panel generalisation of a single-equation approach.
Yes, it's possible to estimate an Error Correction Model (ECM) for panel data in Stata. One common approach is to estimate the panel data model first and then conduct tests for cointegration and ECM.
Yes, it is possible to run an error correction model for panel data in STATA using the `xtscc` command or by estimating a fixed effects or random effects panel model with appropriate lagged variables to capture the error correction mechanism.
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