The data are simulated from a panel error correction model with
heterogeneous adjustment speeds across countries. The true long-run
relationship is:
$$y_{it} = \beta_1 x_{1,it} + \beta_2 x_{2,it} + \mu_i + \varepsilon_{it}$$
with error correction dynamics:
$$\Delta y_{it} = \rho_i (y_{i,t-1} - \beta_1 x_{1,i,t-1} - \beta_2 x_{2,i,t-1})
+ \gamma_1 \Delta x_{1,it} + \gamma_2 \Delta x_{2,it} + u_{it}$$
where \(\rho_i \sim U(-0.6, -0.2)\) varies by panel.