Hi all, I have estimated panel error correction model using –xtpmg-
I’m not sure how to interpret the results.
The DV and the IV are given in percentages and the data is annual.
The model is xtpms d.Y d.X lr(l.Y X) ec(ec) pmg
Looking at the results below the interpretation of the error correction term ( -0.06) is that it takes 17 years to return to long-term equilibrium ?
Is the interpretation of long term coefficient (1.11) that a 1% change in X increases Y in 1.11%?
Results:
Long-term
∆.Unemployment 1.11***
Short-term
Error correction -0.06***
∆.Unemployment 0.094***
@Anat
I hope you ran a level level model where your variables are in percentage. The interpretation will go like, “If you change IV or x by one unit,
we’d expect DV or y to change by β1 (value of coefficient)."
Your ECT is negative and significant that means -0.06 is the adjustment speed which is statistically significant suggesting a relatively low speed of adjustment back to the long-run equilibrium. The result specifically states that deviation from the long-term DV path is corrected by 6.0 percent over the following year.
- Badges
- Science topic
- Similar topics
- Correction