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Asymptotic distribution of factor augmented estimators for panel regression

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  • Greenaway-McGrevy, Ryan
  • Han, Chirok
  • Sul, Donggyu

Abstract

In this paper we derive an asymptotic theory for linear panel regression augmented with estimated common factors. We give conditions under which the estimated factors can be used in place of the latent factors in the regression equation. For the principal components estimate of the factor space it is shown that these conditions are satisfied when T/N→0 and N/T3→0 under regularity. Monte Carlo studies verify the asymptotic theory.

Suggested Citation

  • Greenaway-McGrevy, Ryan & Han, Chirok & Sul, Donggyu, 2012. "Asymptotic distribution of factor augmented estimators for panel regression," Journal of Econometrics, Elsevier, vol. 169(1), pages 48-53.
    • Handle: RePEc:eee:econom:v:169:y:2012:i:1:p:48-53
    DOI: 10.1016/j.jeconom.2012.01.003
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    References listed on IDEAS

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    More about this item

    Keywords

    Factor augmented panel regression; Factor augmented estimator; Principal component augmented estimator; Cross section dependence; Interactive fixed effects;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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