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Quantile regression for dynamic panel data with fixed effects

  • Galvao Jr., Antonio F.
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    This paper studies a quantile regression dynamic panel model with fixed effects. Panel data fixed effects estimators are typically biased in the presence of lagged dependent variables as regressors. To reduce the dynamic bias, we suggest the use of the instrumental variables quantile regression method of Chernozhukov and Hansen (2006) along with lagged regressors as instruments. In addition, we describe how to employ the estimated models for prediction. Monte Carlo simulations show evidence that the instrumental variables approach sharply reduces the dynamic bias, and the empirical levels for prediction intervals are very close to nominal levels. Finally, we illustrate the procedures with an application to forecasting output growth rates for 18 OECD countries.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0304407611000443
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    Article provided by Elsevier in its journal Journal of Econometrics.

    Volume (Year): 164 (2011)
    Issue (Month): 1 (September)
    Pages: 142-157

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    Handle: RePEc:eee:econom:v:164:y:2011:i:1:p:142-157
    Contact details of provider: Web page: http://www.elsevier.com/locate/jeconom

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