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Large panel data models with cross-sectional dependence: a survey

Listed author(s):
  • Chudik, Alexander

    (Federal Reserve Bank of Dallas)

  • Pesaran, M. Hashem

This paper provides an overview of the recent literature on estimation and inference in large panel data models with cross-sectional dependence. It reviews panel data models with strictly exogenous regressors as well as dynamic models with weakly exogenous regressors. The paper begins with a review of the concepts of weak and strong cross-sectional dependence, and discusses the exponent of cross-sectional dependence that characterizes the different degrees of cross-sectional dependence. It considers a number of alternative estimators for static and dynamic panel data models, distinguishing between factor and spatial models of cross-sectional dependence. The paper also provides an overview of tests of independence and weak cross-sectional dependence.

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File URL: http://www.dallasfed.org/assets/documents/institute/wpapers/2013/0153.pdf
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Paper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 153.

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Length: 54 pages
Date of creation: 2013
Handle: RePEc:fip:feddgw:153
Note: Published as: Chudik, Alexander and M. Hashem Pesaran (2015), "Large Panel Data Models with Cross-Sectional Dependence: A Survey," in The Oxford Handbook of Panel Data, ed. Badi H. Baltagi (New York: Oxford University Press), 3-45.
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  17. M. Hashem Pesaran & Aman Ullah & Takashi Yamagata, 2008. "A bias-adjusted LM test of error cross-section independence," Econometrics Journal, Royal Economic Society, vol. 11(1), pages 105-127, March.
  18. Baltagi, Badi H. & Song, Seuck Heun & Koh, Won, 2003. "Testing panel data regression models with spatial error correlation," Journal of Econometrics, Elsevier, vol. 117(1), pages 123-150, November.
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  20. Hashem Pesaran, M. & Yamagata, Takashi, 2008. "Testing slope homogeneity in large panels," Journal of Econometrics, Elsevier, vol. 142(1), pages 50-93, January.
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  38. Peter Sandholt Jensen & Torben Dall Schmidt, 2011. "Testing for Cross-sectional Dependence in Regional Panel Data," Spatial Economic Analysis, Taylor & Francis Journals, vol. 6(4), pages 423-450, July.
  39. Alexei Onatski, 2010. "Determining the Number of Factors from Empirical Distribution of Eigenvalues," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 1004-1016, November.
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  43. repec:hal:journl:peer-00796743 is not listed on IDEAS
  44. Ng, Serena, 2006. "Testing Cross-Section Correlation in Panel Data Using Spacings," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 12-23, January.
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