A Simple Efficient Instrumental Variable Estimator in Panel AR(p) Models
AbstractIn this paper, we show that for panel AR(p) models with iid errors, an instrumental variable (IV) estimator with instruments in the backward orthogonal deviation has the same asymptotic distribution as the infeasible optimal IV estimator when both N and T, the dimensions of the cross section and the time series, are large. If we assume that the errors are normally distributed, the asymptotic variance of the proposed IV estimator is shown to attain the lower bound when both N and T are large. A simulation study is conducted to assess the estimator.
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Bibliographic InfoPaper provided by Institute of Economic Research, Hitotsubashi University in its series Hi-Stat Discussion Paper Series with number d07-213.
Date of creation: May 2007
Date of revision:
panel AR(p) models; the optimal instruments; the backward orthogonal deviation;
Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-02 (All new papers)
- NEP-ECM-2007-06-02 (Econometrics)
- NEP-ETS-2007-06-02 (Econometric Time Series)
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- Kazuhiko Hayakawa, 2008. "On the Effect of Nonstationary Initial Conditions in Dynamic Panel Data Models," Hi-Stat Discussion Paper Series d07-245, Institute of Economic Research, Hitotsubashi University.
- Han, Chirok & Phillips, Peter C. B. & Sul, Donggyu, 2014.
"X-Differencing And Dynamic Panel Model Estimation,"
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- Hayakawa, Kazuhiko, 2009. "On the effect of mean-nonstationarity in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 153(2), pages 133-135, December.
- Kazuhiko Hayakawa, 2009. "First Difference or Forward Orthogonal Deviation- Which Transformation Should be Used in Dynamic Panel Data Models?: A Simulation Study," Economics Bulletin, AccessEcon, vol. 29(3), pages 2008-2017.
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