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Judging Contending Estimators by Simulation: Tournaments in Dynamic Panel Data Models

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  • Jan F. Kiviet

    ()
    (Faculty of Economics and Econometrics, Universiteit van Amsterdam)

Abstract

This discussion paper has led to a publication in The Refinement of Econometric Estimation and Test Procedures .An attempt is made to set rules for a fair and fruitful competition between alternative inference methods based on their performance in simulation experiments. This leads to a list of eight methodologic aspirations. Against their background we criticize aspects of many simulation studies that have been used in the past to compare competing estimators for dynamic panel data models. To illustrate particular pitfalls some further Monte Carlo results are produced, obtained from a simulation design inspired by an analysis of the (non-)invariance properties of estimators and occasionally by available higher-order asymptotic results. We focus on the very specific case of alternative implementations of one and two step generalized method of moments (GMM) estimators in homoskedastic stable zero-mean panel AR(1) models with random individual specific effects. We compare a few implementations, including GMM sytem estimators with alternative weight matrices, and illu! strate that an impartial evaluation of the outcome of a Monte Carlo based contest requires evidence - both analytical and empirical - on the completeness, orthogonality and relevance of the simulation design.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 05-112/4.

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Date of creation: 08 Dec 2005
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Handle: RePEc:dgr:uvatin:20050112

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Web page: http://www.tinbergen.nl

Related research

Keywords: finite sample behavior; generalized method of moments; initial conditions; Monte Carlo methodology; orthogonal parametrizations;

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References

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  1. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July.
  2. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
  3. Ahn, Seung C. & Schmidt, Peter, 1995. "Efficient estimation of models for dynamic panel data," Journal of Econometrics, Elsevier, vol. 68(1), pages 5-27, July.
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  24. Bun, Maurice J. G. & Kiviet, Jan F., 2003. "On the diminishing returns of higher-order terms in asymptotic expansions of bias," Economics Letters, Elsevier, vol. 79(2), pages 145-152, May.
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Cited by:
  1. G. Everaert, 2009. "Using Backward Means to Eliminate Individual Effects from Dynamic Panels," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 09/553, Ghent University, Faculty of Economics and Business Administration.

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