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Dynamic panels with predetermined regressors: likelihood-based estimation and Bayesian averaging with an application to cross-country growth

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  • Enrique Moral-Benito

    () (Banco de España)

Abstract

This paper discusses likelihood-based estimation of linear panel data models with general predetermined variables and individual-specific effects. The resulting (pseudo) maximum likelihood estimator is asymptotically equivalent to standard GMM but tends to have smaller finite-sample biases as illustrated in simulation experiments. Moreover, the availability of such a likelihood function allows applying the Bayesian apparatus to this class of panel data models. Combining the aforementioned estimator with Bayesian model averaging methods we estimate empirical growth models simultaneously considering endogenous regressors and model uncertainty. Empirical results indicate that only the investment ratio seems to robustly cause long-run economic growth. Moreover, the estimated rate of convergence is not significantly different from zero.

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File URL: http://www.bde.es/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/11/Fich/dt1109e.pdf
File Function: First version, May 2011
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Bibliographic Info

Paper provided by Banco de España in its series Banco de España Working Papers with number 1109.

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Length: 55 pages
Date of creation: May 2011
Date of revision:
Handle: RePEc:bde:wpaper:1109

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Related research

Keywords: dynamic panel estimation; maximum likelihood; weak instruments; growth regressions; bayesian model averaging;

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References

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  1. Alonso-Borrego, Cesar & Arellano, Manuel, 1999. "Symmetrically Normalized Instrumental-Variable Estimation Using Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 36-49, January.
  2. Gernot Doppelhofer & Ronald I. Miller & Xavier Sala-i-Martin, 2000. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (Bace) Approach," OECD Economics Department Working Papers 266, OECD Publishing.
  3. Enrique Moral-Benito, 2010. "Model Averaging In Economics," Working Papers wp2010_1008, CEMFI.
  4. Javier Andrés & Óscar Arce & Carlos Thomas, 2010. "Banking competition, collateral constraints and optimal monetary policy," Banco de España Working Papers 1001, Banco de España.
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Cited by:
  1. Enrique Moral-Benito & Cristian Bartolucci, 2011. "Income and democracy: revisiting the evidence," Banco de España Working Papers 1115, Banco de España.

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