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Cross-Sectional Dependence in Panel Data Analysis

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  • Vasilis Sarafidis
  • Tom Wansbeek

Abstract

This article provides an overview of the existing literature on panel data models with error cross-sectional dependence (CSD). We distinguish between weak and strong CSD and link these concepts to the spatial and factor structure approaches. We consider estimation under strong and weak exogeneity of the regressors for both T fixed and T large cases. Available tests for CSD and methods for determining the number of factors are discussed in detail. The finite-sample properties of some estimators and statistics are investigated using Monte Carlo experiments.

Suggested Citation

  • Vasilis Sarafidis & Tom Wansbeek, 2012. "Cross-Sectional Dependence in Panel Data Analysis," Econometric Reviews, Taylor & Francis Journals, vol. 31(5), pages 483-531, September.
  • Handle: RePEc:taf:emetrv:v:31:y:2012:i:5:p:483-531
    DOI: 10.1080/07474938.2011.611458
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    More about this item

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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