FMOLSFully Modified Ordinary Least Squares
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Next, the study runs the panel cointegration vector by employing the dynamic ordinary least-squares (DOLS) and fully-modified ordinary least-squares (FMOLS) regressions for the purpose of comparison.
In order to determine the effect aggressive/conservative working capital policies have on value creation after evidence of long run relationship is established, the study used recently developed Fully-Modified Ordinary Least Square (FMOLS).
Therefore, fully modified ordinary least square (FMOLS) test proposed by [Pedroni (2000)] is used to tackle serial correlation and endogeneity of regressors.
Table V presents the coefficients estimated using the DOLS and FMOLS estimators.
After checking the stationarity of the time series under the analysis, the model (2) is estimated using the Fully Modified Ordinary Least Square (FMOLS) estimation technique which is a uni-variate cointegration technique.
Ramirez y Sharma (2008) analizan el impacto de las remesas en el crecimiento economico de largo plazo en paises de Latinoamerica, con metodos de raices unitarias y de cointegracion en panel, en especial utilizan las pruebas propuestas por Pedroni (1999) y la metodologia de minimos cuadrados modificados con informacion completa (FMOLS).
(2009), A reassessment of finance-growth nexus for Pakistan: Under the investigation of FMOLS and DOLS techniques.
The FMOLS estimator corrects for the presence of endogeneity and through common time dummies, it controls for cross-sectional dependence.