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Panel estimation of state-dependent adjustment when the target is unobserved

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  • Ulf Kalckreuth

    ()

Abstract

Understanding adjustment processes has become central in economics. Empirical analysis is fraught with the problem that the target is usually unobserved. This paper develops, simulates and applies GMM methods for estimating dynamic adjustment models in a panel data context with partially unobserved targets and endogenous, time-varying persistence. In this setup, the standard first difference GMM procedure fails. I propose three estimation strategies. One is based on quasi-differencing, and it leads to two different, but related sets of moment conditions. The second is characterised by a statedependent filter, while the third is an adaptation of the GMM level estimator.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s00181-010-0419-y
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Article provided by Springer in its journal Empirical Economics.

Volume (Year): 40 (2011)
Issue (Month): 1 (February)
Pages: 205-235

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Handle: RePEc:spr:empeco:v:40:y:2011:i:1:p:205-235
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Keywords: Dynamic panel data methods; Economic adjustment; GMM; Quasi-differencing; Non-linear estimation; C23; C15; D21;

Other versions of this item:

Find related papers by JEL classification:
  • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
  • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
  • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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  1. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  2. Russell W. Cooper & Jonathan L. Willis, 2001. "The Economics of Labor Adjustment: Mind the Gap," NBER Working Papers 8527, National Bureau of Economic Research, Inc.
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  4. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
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  6. von Kalckreuth, Ulf, 2008. "Financing constraints, firm level adjustment of capital and aggregate implications," Discussion Paper Series 1: Economic Studies 2008,11, Deutsche Bundesbank, Research Centre.
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  11. Ulf Von Kalckreuth, 2006. "Financial Constraints and Capacity Adjustment: Evidence from a Large Panel of Survey Data," Economica, London School of Economics and Political Science, vol. 73(292), pages 691-724, November.
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  15. Ricardo J. Caballero & Eduardo M. R. A. Engel & John C. Haltiwanger, 1995. "Plant-Level Adjustment and Aggregate Investment Dynamics," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 1-54.
  16. Christian Bayer, 2004. "On the Interaction of Financial Frictions and Fixed Capital Adjustment Costs: Evidence from a Panel of German Firms," Macroeconomics 0410006, EconWPA.
  17. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November.
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