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To Pool or to Aggregate? Tests with a Dynamic Panel Macroeconometric Model of Australian State Labor Markets
The B.E. Journal of Macroeconomics (2007)
  • Kausik Chaudhuri
  • Jeffrey R Sheen, University of Sydney
Abstract

We construct a dynamic error correction model of the Australian labor market using a macroeconomic panel across seven states from 1972:3 to 1999:1. Medium-run equilibrium estimates support a real wage-productivity gap and an unemployment gap. The dynamic short-run estimates support expectations-augmented Phillips curves for wages and prices, and demand-led employment growth. We compare three procedures – pooled, aggregate and mean group estimates. Considerable heterogeneity existed across states in the pooled procedure, and state-level variables had a significant impact in the aggregate procedure. Out-of-sample aggregate forecasting for the pooled, aggregate and mean group procedures suggests that the pooled one performs best.

Keywords
  • panel cointegration,
  • panel macroeconometric modeling,
  • Australian state labor markets,
  • aggregation
Publication Date
January, 2007
Citation Information
Kausik Chaudhuri and Jeffrey R Sheen. "To Pool or to Aggregate? Tests with a Dynamic Panel Macroeconometric Model of Australian State Labor Markets" The B.E. Journal of Macroeconomics Vol. 7 Iss. 1 (2007)
Available at: http://works.bepress.com/jeffrey_sheen/2/