We take into account the above concerns, and we re-consider equation 5 by applying PDOLS and PMG estimators.
In the PDOLS framework, the long-run regression is augmented by lead and lagged differences of the explanatory variables to control for endogenous feedbacks (Saikkonen, 1991).
We begin with the results of the PDOLS estimations.
Table 5 shows that the PMG estimator produces results consistent with the cross-section and PDOLS analysis in terms of sign, but with different magnitude.
Table 6 summarizes the results of the PDOLS and PMG estimations of equation 6 for selected Eurozone countries.