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Problems in Applying Dynamic Panel Data Models: Theoretical and Empirical Findings

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Author Info
Felicitas Nowak-Lehmann D. () (Universität Göttingen, Ibero-Amerika Institut)
Dierk Herzer () (Universität Frankfurt / Universität Göttingen)
Sebastian Vollmer () (Universität Göttingen, Ibero-Amerika Institut)
Inmaculada Martínez-Zarzoso () (Universität Göttingen, Ibero-Amerika Institut)

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Abstract

The objective of this paper is twofold: First, the applicability of a widely used dynamic model, the autoregressive distributed lag model (ARDL), is scrutinized in a panel data setting. Second, Chile’s development of market shares in the EU market in the period of 1988 to 2002 is then analyzed in this dynamic framework, testing for the impact of price competitiveness on market shares and searching for estimation methods that allow dealing with the problem of inter-temporal and cross-section correlation of the disturbances. To estimate the coefficients of the ARDL model, FGLS is utilized within the Three Stage Feasible Generalized Least Squares (3SFGLS) and the system Generalized Method of Moments (system GMM) methods. A computation of errors is added to highlight the susceptibility of the model to problems related to underlying model assumptions.

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Paper provided by Ibero-America Institute for Economic Research in its series Ibero America Institute for Econ. Research (IAI) Discussion Papers with number 140.

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Length: 33 pages
Date of creation: 06 Jun 2006
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Handle: RePEc:got:iaidps:140

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Related research
Keywords: Dynamic panel data model autoregressive distributed lag model pooled 3Stage Feasible

Find related papers by JEL classification:
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Joerg Breitung & M. Hashem Pesaran, 2005. "Unit Roots and Cointegration in Panels," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  2. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
  3. Blundell, Richard & Bond, Stephen & Devereux, Michael & Schiantarelli, Fabio, 1992. "Investment and Tobin's Q: Evidence from company panel data," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 233-257. [Downloadable!] (restricted)
  4. Felicitas Nowak-Lehmann D., 2004. "Different approaches of modelling reaction lags: how do Chilean manufacturing exports react to movements of the real exchange rate?," Applied Economics, Taylor and Francis Journals, vol. 36(14), pages 1547-1560, August. [Downloadable!] (restricted)
  5. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November. [Downloadable!] (restricted)
  6. 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.
  7. 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. [Downloadable!] (restricted)
  8. Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(03), pages 597-625, June. [Downloadable!]
  9. Johnson, Paul & Durlauf, Steven N & Temple, Johnathan R. W., 2004. "Growth Econometrics," Vassar College Department of Economics Working Paper Series 61, Vassar College Department of Economics. [Downloadable!]
    Other versions:
    • Durlauf, Steven N. & Johnson, Paul A. & Temple, Jonathan R.W., 2005. "Growth Econometrics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 8, pages 555-677 Elsevier. [Downloadable!] (restricted)
  10. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July. [Downloadable!] (restricted)
    Other versions:
  11. Pedroni, Peter, 1999. " Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-70, Special I. [Downloadable!] (restricted)
  12. Arellano, Manuel, 1989. "A note on the Anderson-Hsiao estimator for panel data," Economics Letters, Elsevier, vol. 31(4), pages 337-341, December. [Downloadable!] (restricted)
    Other versions:
  13. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November. [Downloadable!] (restricted)
  14. repec:att:wimass:1920418 is not listed on IDEAS
  15. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November. [Downloadable!] (restricted)
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