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Specification of Error Correction Model (ECM) using panel data

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Specification of Error Correction Model (ECM) using panel data

Hi all,

I want to estimate an Error Correction Model (ECM) using panel data.

I know the model specification using one explanatory variable as follow:

yt − yt−1 = B0 + B1(xt − xt−1) + (xt−1 − yt−1) + ut

But unsure what the model form using 3 explanatory variables (x1, x2, x3).
Also not sure if I can use the regional dummy variables to keep the effects fixed.

Any help with this specification will be appreciated.

Talal
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