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On computing generalized least squares and maximum-likelihood estimates of error-components models with incomplete panels and correlated disturbances

Author

Listed:
  • Robert F. Phillips

    () (George Washington University)

Abstract

Calculation of the inverse of the error variance-covariance matrix is required for both feasible generalized least squares and maximum-likelihood estimation of the regression parameters in the two-way error-components model. Since in many applications this matrix can be quite large, efficient computational methods for inverting the matrix are therefore needed. Incomplete panels complicate calculation of the inverse, and, to date, an efficient method for calculating the inverse has not been provided for the two-way error-components model in which the disturbances are correlated and the panel is incomplete. This note rectifies this shortcoming.

Suggested Citation

  • Robert F. Phillips, 2012. "On computing generalized least squares and maximum-likelihood estimates of error-components models with incomplete panels and correlated disturbances," Economics Bulletin, AccessEcon, vol. 32(4), pages 3017-3024.
  • Handle: RePEc:ebl:ecbull:eb-12-00648
    as

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    References listed on IDEAS

    as
    1. Sune Karlsson & Jimmy Skoglund, 2004. "Maximum-likelihood based inference in the two-way random effects model with serially correlated time effects," Empirical Economics, Springer, vol. 29(1), pages 79-88, January.
    2. Davis, Peter, 2002. "Estimating multi-way error components models with unbalanced data structures," Journal of Econometrics, Elsevier, vol. 106(1), pages 67-95, January.
    3. Fuller, Wayne A. & Battese, George E., 1974. "Estimation of linear models with crossed-error structure," Journal of Econometrics, Elsevier, vol. 2(1), pages 67-78, May.
    4. Baltagi, Badi H. & Wu, Ping X., 1999. "Unequally Spaced Panel Data Regressions With Ar(1) Disturbances," Econometric Theory, Cambridge University Press, vol. 15(06), pages 814-823, December.
    5. Wansbeek, Tom & Kapteyn, Arie, 1989. "Estimation of the error-components model with incomplete panels," Journal of Econometrics, Elsevier, vol. 41(3), pages 341-361, July.
    6. Balestra, Pietro, 1980. "A note on the exact transformation associated with the first-order moving average process," Journal of Econometrics, Elsevier, vol. 14(3), pages 381-394, December.
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    More about this item

    Keywords

    autoregressive; unbalanced panel; random effects;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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