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Mean Group Instrumental Variable Estimation of Time-Varying Large Heterogeneous Panels with Endogenous Regressors

Author

Listed:
  • Yu Bai
  • Massimiliano Marcellino
  • George Kapetanios

Abstract

The large heterogeneous panel data models are extended to the setting where the heterogenous coefficients are changing over time and the regressors are endogenous. Kernel-based non-parametric timevarying parameter instrumental variable mean group (TVP-IV-MG) estimator is proposed for the timevarying cross-sectional mean coefficients. The uniform consistency is shown and the pointwise asymptotic normality of the proposed estimator is derived. A data-driven bandwidth selection procedure is also proposed. The finite sample performance of the proposed estimator is investigated through a Monte Carlo study and an empirical application on multi-country Phillips curve with time-varying parameters.

Suggested Citation

  • Yu Bai & Massimiliano Marcellino & George Kapetanios, 2023. "Mean Group Instrumental Variable Estimation of Time-Varying Large Heterogeneous Panels with Endogenous Regressors," Monash Econometrics and Business Statistics Working Papers 13/23, Monash University, Department of Econometrics and Business Statistics.
    • Handle: RePEc:msh:ebswps:2023-13
    as

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    File URL: https://www.monash.edu/business/ebs/research/publications/ebs/2023/wp13-2023.pdf
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    References listed on IDEAS

    as
    1. Liudas Giraitis & George Kapetanios & Tony Yates, 2018. "Inference on Multivariate Heteroscedastic Time Varying Random Coefficient Models," Journal of Time Series Analysis, Wiley Blackwell, vol. 39(2), pages 129-149, March.
    2. Giraitis, Liudas & Kapetanios, George & Marcellino, Massimiliano, 2021. "Time-varying instrumental variable estimation," Journal of Econometrics, Elsevier, vol. 224(2), pages 394-415.
    3. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
    4. Dendramis, Yiannis & Giraitis, Liudas & Kapetanios, George, 2021. "Estimation Of Time-Varying Covariance Matrices For Large Datasets," Econometric Theory, Cambridge University Press, vol. 37(6), pages 1100-1134, December.
    5. Badi H. Baltagi & Qu Feng & Chihwa Kao, 2019. "Structural changes in heterogeneous panels with endogenous regressors," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 34(6), pages 883-892, September.
    6. Galí, Jordi & Gertler, Mark, 1999. "Inflation Dynamics: A Structural Economic Analysis," CEPR Discussion Papers 2246, C.E.P.R. Discussion Papers.
    7. Degui Li & Jia Chen & Jiti Gao, 2011. "Non‐parametric time‐varying coefficient panel data models with fixed effects," Econometrics Journal, Royal Economic Society, vol. 14(3), pages 387-408, October.
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    More about this item

    Keywords

    large heterogeneous panels; non-parametric methods; time-varying parameters; mean group estimator;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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