Chapter 4. The Interplay of Reading, Spelling, and Math in Primary Education: A Panel VAR Analysis (e.g., sex, parental education, etc.), which remain constant across the observation period. By including the individual fixed effect, the model focuses on changes within each student over time, rather than comparing differences between students. 4.3.2 Panel VAR Model While fixed-effects regressions can capture contemporaneous relationships among skills, they do not reflect how skills vary together over time. They also do not account for feedback mechanisms between skills, nor can they analyze how changes in one skill are associated with future patterns in other skills. As a result, fixed-effects methods are limited in exploring the potential consequences of hypothetical changes (or shocks) in skills over time. Therefore, this chapter uses a panel VAR approach to investigate the interplay between reading, spelling, and math skills. A panel VAR model is a multivariate model that examines dynamic interdependencies between various endogenous and interdependent variables. We specify a panel VAR model of order p for student i as follows: Yit = pX m=1 ΓmYit−m+vi +uit (4.5) withi ∈ {1, 2, . . . ,N}, t ∈ {1, 2, . . . ,T}, andwhere Yit is a (3 x 1) vector of stationary variables.8 The (3 x 3) matrices Γm are parameters 8We perform a unit root test, and reject the null hypothesis of a unit root. More specifically, we have executed the Breitung, Harris-Tzavalis and Im-Peseran-Shin unit root tests. Therefore, no transformation is applied to the standardized skill 90
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