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Cross-sectional Dependence in Panel Data Analysis

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  • Sarafidis, Vasilis
  • Wansbeek, Tom

Abstract

This paper provides an overview of the existing literature on panel data models with error cross-sectional dependence. We distinguish between spatial dependence and factor structure dependence and we analyse the implications of weak and strong cross-sectional dependence on the properties of the estimators. We consider estimation under strong and weak exogeneity of the regressors for both T fixed and T large cases. Available tests for error cross-sectional dependence 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.

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  • Sarafidis, Vasilis & Wansbeek, Tom, 2010. "Cross-sectional Dependence in Panel Data Analysis," MPRA Paper 20367, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:20367
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    More about this item

    Keywords

    Panel data; Cross-sectional dependence; Spatial dependence; Factor structure; Strong/Weak exogeneity.;
    All these keywords.

    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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