Consistent Estimation of Panel Data Models with a Multi-factor Error Structure
AbstractThis paper considers the panel data model with a multifactor structure in both the errors and the regressors which was studied by Pesaran (â€œEstimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure, Econometrica, 2006). Estimators are proposed that are consistent for fixed T as N tends to infinity. By allowing T to be fixed some of the assumptions imposed by Pesaran are relaxed and, at the same time, some of the complexities of the large N and T asymptotics are bypassed. A small Monte Carlo simulation shows that these new estimators are very accurate for very small values of T .
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Bibliographic InfoPaper provided by School of Economics, University of Surrey in its series School of Economics Discussion Papers with number 0112.
Length: 40 pages
Date of creation: Feb 2012
Date of revision:
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