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Nonstationary Panel Data Analysis: An Overview of Some Recent Developments

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This paper overviews some recent developments in panel data asymptotics, concentrating on the nonstationary panel case and gives a new result for models with individual effects. Underlying recent theory are asymptotics for multi-indexed processes in which both indexes may pass to infinity. We review some of the new limit theory that has been developed, show how it can be applied and give a new interpretation of individual effects in nonstationary panel data. Fundamental to the interpretation of much of the asymptotics is the concept of a panel regression coefficient which measures the long run average relation across a section of the panel. This concept is analogous to the statistical interpretation of the coefficient in a classical regression relation. A variety of nonstationary panel data models are discussed and the paper reviews the asymptotic properties of estimators in these various models. Some recent developments in panel unit root tests and stationary dynamic panel regression models are also reviewed.

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Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1221.

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Length: 24 pages
Date of creation: Jun 1999
Date of revision:
Publication status: Published in Econometric Reviews (2000), 19(3): 263-286
Handle: RePEc:cwl:cwldpp:1221

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