Moon, HR;
Weidner, M;
(2017)
Dynamic Linear Panel Regression Models with Interactive Fixed Effects.
Econometric Theory
, 33
(1)
pp. 158-195.
10.1017/S0266466615000328.
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Abstract
We analyze linear panel regression models with interactive fixed effects and predetermined regressors, for example lagged-dependent variables. The first-order asymptotic theory of the least squares (LS) estimator of the regression coefficients is worked out in the limit where both the cross-sectional dimension and the number of time periods become large. We find two sources of asymptotic bias of the LS estimator: bias due to correlation or heteroscedasticity of the idiosyncratic error term, and bias due to predetermined (as opposed to strictly exogenous) regressors. We provide a bias-corrected LS estimator. We also present bias-corrected versions of the three classical test statistics (Wald, LR, and LM test) and show their asymptotic distribution is a χ2-distribution. Monte Carlo simulations show the bias correction of the LS estimator and of the test statistics also work well for finite sample sizes.
| Type: | Article |
|---|---|
| Title: | Dynamic Linear Panel Regression Models with Interactive Fixed Effects |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1017/S0266466615000328 |
| Publisher version: | http://dx.doi.org/10.1017/S0266466615000328 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | social sciences, science & technology, physical sciences, economics, mathematics, interdisciplinary applications, social sciences, mathematical methods, statistics & probability, business & economics, mathematics, mathematical methods in social sciences, multifactor error structure, sample covariance-matrix, largest eigenvalue, bias reduction, number, inference, parameter, arbitrage, boundary, limit |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics |
| URI: | https://discovery-pp.ucl.ac.uk/id/eprint/1549660 |
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