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Panel estimation of state dependent adjustment when the target is unobserved

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  • von Kalckreuth, Ulf

Abstract

Understanding adjustment processes has become central in economics. Empirical analysis is fraught with the problem that the target is usually unobserved. This paper develops, simulates and applies GMM methods for estimating dynamic adjustment models in a panel data context with partially unobserved targets and endogenous, time-varying persistence. In this setup, the standard first difference GMM procedure fails. I propose three estimation strategies. One is based on quasi-differencing, and it leads to two different, but related sets of moment conditions. The second is characterised by a statedependent filter, while the third is an adaptation of the GMM level estimator. -- Ökonomische Anpassungsvorgänge auf der Mikroebene sind inhärent schwierig zu schätzen, da typischerweise das Ziel der Anpassung nur unvollkommen beobachtet werden kann. Das vorliegende Papier untersucht zustandsabhängige ökonomische Anpassungsprozesse, wie sie sich bei zeitlich variablen Beschränkungen ergeben, wie etwa unter finanziellen Restriktionen. Das Problem latenter Zielniveaus wird hier mit Hilfe von Panelinformationen und einem Fehlerkomponentenansatz angegangen. Die Standardmethoden dynamische Panelmodelle, wie sie von Anderson and Hsiao (1982), Arellano and Bond (1991), Arellano and Bover (1995) and Blundell and Bond (1998) entwickelt wurden, sind auf diesen Fall nicht anwendbar, da sie eine zeitlich invariante lineare Dynamik voraussetzen. Das Papier zeigt, wie die GMM-Methodik auf den Fall ökonomischer Anpassungsvorgänge verallgemeinert werden können, bei denen das Ziel teilweise unbeobachtet ist und die Nichtlinearität die Form diskreter Regime annimmt. Dies ist nicht trivial, weil der unbekannte und zeitlich variable Anpassungskoeffizient mit dem ebenso unbekannten individuellen Störterm interagiert. Aber der Ertrag ist reichhaltig, weil eine Reihe wohlbekannter Prozeduren und Standardtests für das Problem der ökonomischen Anpassung nutzbar gemacht werden kann. Die hier beschriebenen Schätzverfahren können dazu beitragen, eine große Zahl ökonomischer Fragestellungen adäquater zu behandeln als dies bislang möglich war. Beispiele sind die Dynamik der Nachfrage nach Arbeit und Kapital, bei der Preissetzung und bei der Anpassung der finanziellen Struktur in Firmen und Banken.

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Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2008,09.

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Date of creation: 2008
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Handle: RePEc:zbw:bubdp1:7337

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Keywords: Dynamic panel data models; economic adjustment;

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  3. Russell Cooper & Jonathan L. Willis, 2004. "A Comment on the Economics of Labor Adjustment: Mind the Gap," American Economic Review, American Economic Association, American Economic Association, vol. 94(4), pages 1223-1237, September.
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  7. Ricardo J. Caballero & Eduardo M. R. A. Engel & John C. Haltiwanger, 1995. "Plant-Level Adjustment and Aggregate Investment Dynamics," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 1-54.
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  10. von Kalckreuth, Ulf, 2008. "Financing constraints, firm level adjustment of capital and aggregate implications," Discussion Paper Series 1: Economic Studies 2008,11, Deutsche Bundesbank, Research Centre.
  11. Ulf Von Kalckreuth, 2006. "Financial Constraints and Capacity Adjustment: Evidence from a Large Panel of Survey Data," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 73(292), pages 691-724, November.
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  15. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, Elsevier, vol. 18(1), pages 47-82, January.
  16. Stephen Bond & Julie Ann Elston & Jacques Mairesse & Beno�t Mulkay, 2003. "Financial Factors and Investment in Belgium, France, Germany, and the United Kingdom: A Comparison Using Company Panel Data," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 153-165, February.
  17. Ricardo J. Caballero & Eduardo M.R.A. Engel, 2004. "A Comment on the Economics of Labor Adjustment: Mind the Gap: Reply," American Economic Review, American Economic Association, American Economic Association, vol. 94(4), pages 1238-1244, September.
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  19. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, Econometric Society, vol. 50(4), pages 1029-54, July.
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