Bootstrap Based Bias Correction for Homogeneous Dynamic²² Panels
AbstractThe within or least squares dummy variable estimator is severely biased in homogeneous dynamic panel models with moderate T. We present a bias correction for this estimator based on an iterative bootstrap procedure. Monte Carlo simulations show that this procedure is a good alternative for the analytical correction by Kiviet (1995, JE). The bootstrap (i) improves on the analytical correction when the variance of the individual effects increases, (ii) is straightforward to extend to less restrictive settings and (iii) allows for a correction of the longrun coefficient that is independent of the correction of the short-run coefficients.
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Bibliographic InfoPaper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 04/263.
Length: 40 pages
Date of creation: Oct 2004
Date of revision:
Bias correction; within estimator; dynamic panel; GMM estimator; Monte Carlo simulation; Bootstrap;
Find related papers by JEL classification:
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: 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-2004-11-22 (All new papers)
- NEP-ECM-2004-11-22 (Econometrics)
- NEP-ETS-2004-11-22 (Econometric Time Series)
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