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On bootstrapping panel factor series

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  • Trapani, Lorenzo
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    Abstract

    This paper studies the asymptotic validity of sieve bootstrap for nonstationary panel factor series. Two main results are shown. Firstly, a bootstrap Invariance Principle is derived pointwise in i, obtaining an upper bound for the order of truncation of the AR polynomial that depends on n and T. Consistent estimation of the long run variances is also studied for (n,T)→∞. Secondly, joint bootstrap asymptotics is also studied, investigating the conditions under which the bootstrap is valid. In particular, the extent of cross sectional dependence which can be allowed for is investigated. Whilst we show that, for general forms of cross dependence, consistent estimation of the long run variance (and therefore validity of the bootstrap) is fraught with difficulties, however we show that “one-cross-sectional-unit-at-a-time” resampling schemes yield valid bootstrap based inference under weak forms of cross-sectional dependence.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Econometrics.

    Volume (Year): 172 (2013)
    Issue (Month): 1 ()
    Pages: 127-141

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    Handle: RePEc:eee:econom:v:172:y:2013:i:1:p:127-141

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    Web page: http://www.elsevier.com/locate/jeconom

    Related research

    Keywords: Bootstrap; Invariance principle; Factor series; Vector AutoRegression; Joint asymptotics;

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    References

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    1. Peter C.B. Phillips, 1987. "Weak Convergence of Sample Covariance Matrices to Stochastic Integrals via Martingale Approximations," Cowles Foundation Discussion Papers 846, Cowles Foundation for Research in Economics, Yale University.
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    11. In Choi, 2011. "Efficient Estimation of Nonstationary Factor Models," Working Papers 1101, Research Institute for Market Economy, Sogang University, revised Jun 2011.
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    15. Chang, Yoosoon & Park, Joon & Song, Kevin, 2002. "Bootstrapping Cointegrating Regressions," Working Papers 2002-04, Rice University, Department of Economics.
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    Cited by:
    1. Ipatova, Ekaterina & Trapani, Lorenzo, 2013. "First-differenced inference for panel factor series," Economics Letters, Elsevier, vol. 118(2), pages 364-366.

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