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Univariate Panel Data Models and GMM Estimators: An Exploration Using Real and Simulated Data

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Author Info

  • Bronwyn H. Hall

    (Nuffield College)

  • Jacques Mairesse

    (INSEE - CREST)

Abstract

This paper explores the time series properties of commonly used variables in firm-level panels: sales (turnover), employment, R\&D, investment, and cash flow. We focus on two questions: 1) whether the behavior of these series is consistent with stationarity, and if so, 2) what order of autoregressive process best describes them. The answer to these two questions is of substantive interest for those who model the dynamic evolution of firms and their behavior. In particular, we are interested in whether firm data is trend stationary (exhibits regression to individual firm means) or difference stationary (evolves as a random walk, possibly with a non-zero drift). We find that estimation of even these very simple processes using fairly large but short panels is fraught with difficulty and we explore the convergence rate of the GMM estimator using simulation methods. We also report the results of using a new class of tests proposed by Im, Pesaran, and Smith for discriminating between stationary and nonstationary processes in medium-sized panels.

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1114.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:1114

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  1. Bronwyn H. Hall & Jacques Mairesse & Lee Branstetter & Bruno Crepon, 1999. "Does Cash Flow Cause Investment and R&D: An Exploration Using Panel Data for French, Japanese, and United States Scientific Firms," Finance 9902005, EconWPA.
  2. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  3. Pesaran, M. H. & Shin, Y. & Smith, R. P., 1997. "Pooled Estimation of Long-run Relationships in Dynamic Heterogeneous Panels," Cambridge Working Papers in Economics 9721, Faculty of Economics, University of Cambridge.
  4. Keane, Michael P & Runkle, David E, 1992. "On the Estimation of Panel-Data Models with Serial Correlation When Instruments Are Not Strictly Exogenous," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(1), pages 1-9, January.
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Cited by:
  1. Hall, B. & Mairesse, J. & Branstetter, L. & Crepon, B., 1998. "Does Cash Flow cause Investment and R&D: An Exploration Using Panel Data for French, Japanese, and United States Scientific Firms," Economics Papers 142, Economics Group, Nuffield College, University of Oxford.
  2. Hyungsik Roger Moon, 2000. "GMM Estimation of Autoregressive Roots Near Unity with Panel Data," Econometric Society World Congress 2000 Contributed Papers 0913, Econometric Society.

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