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Estimating Linear Dynamic Panels with Recentered Moments

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  • Yong Bao

    (Department of Economics, Purdue University, West Lafayette, IN 47907, USA)

Abstract

This paper proposes estimating linear dynamic panels by explicitly exploiting the endogeneity of lagged dependent variables and expressing the crossmoments between the endogenous lagged dependent variables and disturbances in terms of model parameters. These moments, when recentered, form the basis for model estimation. The resulting estimator’s asymptotic properties are derived under different asymptotic regimes (large number of cross-sectional units or long time spans), stable conditions (with or without a unit root), and error characteristics (homoskedasticity or heteroskedasticity of different forms). Monte Carlo experiments show that it has very good finite-sample performance.

Suggested Citation

  • Yong Bao, 2024. "Estimating Linear Dynamic Panels with Recentered Moments," Econometrics, MDPI, vol. 12(1), pages 1-48, January.
    • Handle: RePEc:gam:jecnmx:v:12:y:2024:i:1:p:3-:d:1321182
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    References listed on IDEAS

    as
    1. Pesaran, M. Hashem & Yang, Cynthia Fan, 2021. "Estimation and inference in spatial models with dominant units," Journal of Econometrics, Elsevier, vol. 221(2), pages 591-615.
    2. H. Kelejian, Harry & Prucha, Ingmar R., 2001. "On the asymptotic distribution of the Moran I test statistic with applications," Journal of Econometrics, Elsevier, vol. 104(2), pages 219-257, September.
    3. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    4. Hansen, Christian B., 2007. "Asymptotic properties of a robust variance matrix estimator for panel data when T is large," Journal of Econometrics, Elsevier, vol. 141(2), pages 597-620, December.
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