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Testing Weak Cross-Sectional Dependence in Large Panels

  • Pesaran, M. Hashem

    ()

    (University of Cambridge)

This paper considers testing the hypothesis that errors in a panel data model are weakly cross sectionally dependent, using the exponent of cross-sectional dependence α, introduced recently in Bailey, Kapetanios and Pesaran (2012). It is shown that the implicit null of the CD test depends on the relative expansion rates of N and T. When T=O(N^ϵ), for some 0

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6432.

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Length: 25 pages
Date of creation: Mar 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6432
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  1. Sarafidis, Vasilis & Yamagata, Takashi & Robertson, Donald, 2009. "A test of cross section dependence for a linear dynamic panel model with regressors," Journal of Econometrics, Elsevier, vol. 148(2), pages 149-161, February.
  2. Vasilis Sarafidis & Tom Wansbeek, 2012. "Cross-Sectional Dependence in Panel Data Analysis," Econometric Reviews, Taylor & Francis Journals, vol. 31(5), pages 483-531, September.
  3. Alexander Chudik & M. Hashem Pesaran & Elisa Tosetti, 2009. "Weak and Strong Cross Section Dependence and Estimation of Large Panels," CESifo Working Paper Series 2689, CESifo Group Munich.
  4. N/A, 1973. "A Correction," The Indian Economic & Social History Review, , vol. 10(2), pages 207-207, April.
  5. M. Hashem Pesaran, 2004. "General Diagnostic Tests for Cross Section Dependence in Panels," CESifo Working Paper Series 1229, CESifo Group Munich.
  6. Badi H. Baltagi & Qu Feng & Chihwa Kao, 2011. "Testing for sphericity in a fixed effects panel data model," Econometrics Journal, Royal Economic Society, vol. 14, pages 25-47, 02.
  7. Pesaran, M.H. & Ullah, A. & Yamagata. T., 2006. "A Bias-Adjusted LM Test of Error Cross Section Independence," Cambridge Working Papers in Economics 0641, Faculty of Economics, University of Cambridge.
  8. Frees, Edward W., 1995. "Assessing cross-sectional correlation in panel data," Journal of Econometrics, Elsevier, vol. 69(2), pages 393-414, October.
  9. Francesco Moscone & Elisa Tosetti, 2009. "A Review And Comparison Of Tests Of Cross-Section Independence In Panels," Journal of Economic Surveys, Wiley Blackwell, vol. 23(3), pages 528-561, 07.
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