Pooled Mean Group Estimation: Allowing for Long Run trends

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Pooled Mean Group Estimation: Allowing for Long Run trends

Postby MT_MANC » Thu Jan 31, 2019 9:44 am

I would like to exploit the "compromise" benefits of PMG estimation and estimate the ARDL Co-I relationship between real GVA levels for each of 12 industrial sectors and national GDP/GVA. Given the common long-run coefficient estimates in the PMG method (ie a unit coeff on GDP to ensure sectors add-up) is there any smart way to also allow for long-run trends in sector GDP shares (eg Manuf share -ve, Services share +ve). I presume the PMG method itself may be complicated by a (common) deterministic trend in the long run relationship ? Any guidance on how to model long-run sector share trends with PMG appreciated.

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