Efficiency in Large Dynamic Panel Models with Common Factor
AbstractThis paper deals with efficient estimation in exchangeable nonlinear dynamic panel models with common unobservable factor. The specification accounts for both micro- and macro-dynamics, induced by the lagged individual observation and the common stochastic factor, respectively. For large cross-sectional and time dimensions, and under a semiparametric identification condition, we derive the efficiency bound and introduce efficient estimators for both the micro- and macro-parameters. In particular, we show that the fixed effects estimator of the micro-parameter is not only consistent, but also asymptotically efficient. The results are illustrated with the stochastic migration model for credit risk analysis.
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Bibliographic InfoPaper provided by Swiss Finance Institute in its series Swiss Finance Institute Research Paper Series with number 09-12.
Length: 67 pages
Date of creation: Aug 2008
Date of revision: Mar 2009
Nonlinear Panel Model; Factor Model; Exchangeability; Systematic Risk; Efficiency Bound; Semi-parametric Efficiency; Fixed Effects Estimator; Bayesian Statistics; Stochastic Migration; Granularity;
Other versions of this item:
- Patrick GAGLIARDINI & Christian GOURIEROUX, 2010. "Efficiency in Large Dynamic Panel Models with Common Factor," Working Papers 2010-05, Centre de Recherche en Economie et Statistique.
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-06-03 (All new papers)
- NEP-ECM-2009-06-03 (Econometrics)
- NEP-ETS-2009-06-03 (Econometric Time Series)
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