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Panel Local Projections without Fixed-Effects: A Cumulative-Difference OLS Estimator

Author

Listed:
  • Alfonso Ugarte

Abstract

Las propiedades teóricas de las proyecciones locales en datos de panel todavía se comprenden solo de manera parcial. Estudios recientes han demostrado que los estimadores de efectos fijos sufren de un sesgo de parámetros incidentales. Este artículo propone un nuevo estimador insesgado basado en MCO y diferencias acumuladas. Despite their popularity, the theoretical properties of panel local projections remain only partially understood. Recent work has shown that conventional fixed-effects estimators suffer from an incidental parameter bias. This paper proposes a new unbiased estimator based on pooled OLS and long-differences.

Suggested Citation

  • Alfonso Ugarte, 2026. "Panel Local Projections without Fixed-Effects: A Cumulative-Difference OLS Estimator," Working Papers 26/09, BBVA Bank, Economic Research Department.
    • Handle: RePEc:bbv:wpaper:2609
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    References listed on IDEAS

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    1. Atif Mian & Amir Sufi & Emil Verner, 2017. "Household Debt and Business Cycles Worldwide," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(4), pages 1755-1817.
    2. Valerie Cerra & Sweta Chaman Saxena, 2008. "Growth Dynamics: The Myth of Economic Recovery," American Economic Review, American Economic Association, vol. 98(1), pages 439-457, March.
    3. Oscar Jorda & Alan M. Taylor, 2025. "Local Projections," Journal of Economic Literature, American Economic Association, vol. 63(1), pages 59-110, March.
    4. Ziwei Mei & Liugang Sheng & Zhentao Shi, 2023. "Nickell Bias in Panel Local Projection: Financial Crises Are Worse Than You Think," Papers 2302.13455, arXiv.org, revised Jan 2026.
    5. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    6. Mei, Ziwei & Sheng, Liugang & Shi, Zhentao, 2026. "Nickell bias in panel local projection: Financial crises are worse than you think," Journal of International Economics, Elsevier, vol. 160(C).
    7. Herbst, Edward P. & Johannsen, Benjamin K., 2024. "Bias in local projections," Journal of Econometrics, Elsevier, vol. 240(1).
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    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • C87 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Econometric Software
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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