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Least Squares Dummy Variable in Determination of Dynamic Panel Model Parameters

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  • Joseph Uchenna Okeke
  • Evelyn Nkiruka Okeke

Abstract

This paper investigates the small sample performance of the Least Squares Dummy Variable (LSDV) estimator of the dynamic panel data models for period, T, greater than the cross sections, N and its large sample performance in the direction of T as N remains finite, and compares it with the performance of the instrumental variable- generalize method of moments (IV-GMM) estimators using the properties of root mean squares error(RMSE) of the model , root mean squares error of the autoregressive term ? (RMSE?), the bias of ? (bias?) and the Akaike Information Criterion (AIC) with the motive of ascertaining the usefulness of the LSDV estimator in determining the parameters of a dynamic panel model as T? and finite N, for which it is regarded as consistent.

Suggested Citation

  • Joseph Uchenna Okeke & Evelyn Nkiruka Okeke, 2018. "Least Squares Dummy Variable in Determination of Dynamic Panel Model Parameters," European Journal of Engineering and Technology Research, European Open Science, vol. 1(6), pages 77-81, July.
    • Handle: RePEc:epw:ejeng0:v:1:y:2018:i:6:id:60197
    DOI: 10.24018/ejeng.2016.1.6.197
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    References listed on IDEAS

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    1. Bun, Maurice J.G. & Carree, Martin A., 2005. "Bias-Corrected Estimation in Dynamic Panel Data Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 200-210, April.
    2. Bruno, Giovanni S.F., 2005. "Approximating the bias of the LSDV estimator for dynamic unbalanced panel data models," Economics Letters, Elsevier, vol. 87(3), pages 361-366, June.
    3. Jinyong Hahn & Guido Kuersteiner, 2002. "Asymptotically Unbiased Inference for a Dynamic Panel Model with Fixed Effects when Both "n" and "T" Are Large," Econometrica, Econometric Society, vol. 70(4), pages 1639-1657, July.
    4. Bun, Maurice J. G. & Kiviet, Jan F., 2003. "On the diminishing returns of higher-order terms in asymptotic expansions of bias," Economics Letters, Elsevier, vol. 79(2), pages 145-152, May.
    5. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    6. Greene, W., 2001. "Estimating Econometric Models with Fixed Effects," New York University, Leonard N. Stern School Finance Department Working Paper Seires 01-10, New York University, Leonard N. Stern School of Business-.
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