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Empirical Likelihood Estimation in Dynamic Panel Models

This paper proposes and analyses an hybrid of Owen.s (1988, 1990, 1991) Empirical Likelihood (EL) and bootstrap, EL-bootstrap, as an alternative to the General Method of Moments (GMM) within dynamic panel data models. We concentrate on the .nite-sample size properties of their over-identification tests. Our results show that EL-bootstrap may be a good alternative to GMM estimation within this setting. The practical usefulness of our findings is illustrated via application on an AR(1) univariate panel data model with individual e¤ects using the cash-flow series of 174 firms in the United States.

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File URL: http://www.econ.ed.ac.uk/papers/panel_data_improved_paper.pdf
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Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 168.

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Length: 40
Date of creation: 22 Aug 2007
Date of revision:
Handle: RePEc:edn:esedps:168
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  1. Hjalmarsson, Erik, 2005. "Predictive regressions with panel data," Working Papers in Economics 160, University of Gothenburg, Department of Economics.
  2. Hall, B. & Mairesse, J. & Branstetter, L. & Crepon, B., 1998. "Does Cash Flow cause Investment and R&D: An Exploration Using Panel Data for French, Japanese, and United States Scientific Firms," Economics Papers 142, Economics Group, Nuffield College, University of Oxford.
  3. Hansen, Lars Peter & Heaton, John & Yaron, Amir, 1996. "Finite-Sample Properties of Some Alternative GMM Estimators," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(3), pages 262-80, July.
  4. John Y. Campbell & Motohiro Yogo, 2002. "Efficient Tests of Stock Return Predictability," Harvard Institute of Economic Research Working Papers 1972, Harvard - Institute of Economic Research.
  5. Ahn, Seung C. & Schmidt, Peter, 1995. "Efficient estimation of models for dynamic panel data," Journal of Econometrics, Elsevier, vol. 68(1), pages 5-27, July.
  6. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  7. Frank Windmeijer, 1998. "Efficiency comparisons for a system GMM estimator in dynamic panel data models," IFS Working Papers W98/01, Institute for Fiscal Studies.
  8. Bond, Stephen & Bowsher, Clive & Windmeijer, Frank, 2001. "Criterion-based inference for GMM in autoregressive panel data models," Economics Letters, Elsevier, vol. 73(3), pages 379-388, December.
  9. Maurice J.G. Bun & Frank Windmeijer, 2007. "The Weak Instrument Problem of the System GMM Estimator in Dynamic Panel Data Models," Bristol Economics Discussion Papers 07/595, Department of Economics, University of Bristol, UK.
  10. Horowitz, Joel L. & Savin, N. E., 2000. "Empirically relevant critical values for hypothesis tests: A bootstrap approach," Journal of Econometrics, Elsevier, vol. 95(2), pages 375-389, April.
  11. Joel L. Horowitz, 1996. "Bootstrap Methods in Econometrics: Theory and Numerical Performance," Econometrics 9602009, EconWPA, revised 05 Mar 1996.
  12. Richard Blundell & Steve Bond & Frank Windmeijer, 2000. "Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator," IFS Working Papers W00/12, Institute for Fiscal Studies.
  13. Alonso-Borrego, Cesar & Arellano, Manuel, 1999. "Symmetrically Normalized Instrumental-Variable Estimation Using Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 36-49, January.
  14. Matz Dahlberg & Eva Mork & Per Tovmo, 2008. "Power properties of the Sargan test in the presence of measurement errors in dynamic panels," Applied Economics Letters, Taylor & Francis Journals, vol. 15(5), pages 349-353.
  15. Bun, Maurice J.G. & Kiviet, Jan F., 2006. "The effects of dynamic feedbacks on LS and MM estimator accuracy in panel data models," Journal of Econometrics, Elsevier, vol. 132(2), pages 409-444, June.
  16. repec:dgr:uvatin:20010067 is not listed on IDEAS
  17. Frank Kleibergen, 2004. "Testing Subsets of Structural Parameters in the Instrumental Variables," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 418-423, February.
  18. Stephen Bond & Céline Nauges & Frank Windmeijer, 2002. "Unit Roots and Identification in Autoregressive Panel Data Models: A Comparison of Alternative Tests," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C5-4, International Conferences on Panel Data.
  19. Magdalinos, Michael A. & Symeonides, Spyridon D., 1996. "A reinterpretation of the tests of overidentifying restrictions," Journal of Econometrics, Elsevier, vol. 73(2), pages 325-353, August.
  20. Steve Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  21. Stephen Bond & Frank Windmeijer, 2002. "Finite Sample Inference for GMM Estimators in Linear Panel Data Models," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C6-3, International Conferences on Panel Data.
  22. Richard Blundell & Steve Bond, 1999. "GMM estimation with persistent panel data: an application to production functions," IFS Working Papers W99/04, Institute for Fiscal Studies.
  23. Kazuhiko Hayakawa, 2005. "Small Sample Bias Propreties of the System GMM Estimator in Dynamic Panel Data Models," Hi-Stat Discussion Paper Series d05-82, Institute of Economic Research, Hitotsubashi University.
  24. repec:dgr:uvatin:20000055 is not listed on IDEAS
  25. 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.
  26. Lewellen, Jonathan, 2004. "Predicting returns with financial ratios," Journal of Financial Economics, Elsevier, vol. 74(2), pages 209-235, November.
  27. Marcelo J. Moreira & Jack R. Porter & Gustavo A. Suarez, 2004. "Bootstrap and Higher-Order Expansion Validity When Instruments May Be Weak," Harvard Institute of Economic Research Working Papers 2048, Harvard - Institute of Economic Research.
  28. Han, Chirok & Phillips, Peter C. B., 2010. "Gmm Estimation For Dynamic Panels With Fixed Effects And Strong Instruments At Unity," Econometric Theory, Cambridge University Press, vol. 26(01), pages 119-151, February.
  29. Hall, Peter & Horowitz, Joel L, 1996. "Bootstrap Critical Values for Tests Based on Generalized-Method-of-Moments Estimators," Econometrica, Econometric Society, vol. 64(4), pages 891-916, July.
  30. Bowsher, Clive G., 2002. "On testing overidentifying restrictions in dynamic panel data models," Economics Letters, Elsevier, vol. 77(2), pages 211-220, October.
  31. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  32. repec:dgr:uvatin:20020101 is not listed on IDEAS
  33. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
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