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Likelihood inference in an Autoregression with fixed effects

Author

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  • Geert Dhaene

    (KU Leuven)

  • Koen Jochmans

    (Département d'économie)

Abstract

We calculate the bias of the profile score for the regression coefficients in a multistratum autoregressive model with stratum-specific intercepts. The bias is free of incidental parameters. Centering the profile score delivers an unbiased estimating equation and, upon integration, an adjusted profile likelihood. A variety of other approaches to constructing modified profile likelihoods are shown to yield equivalent results. However, the global maximizer of the adjusted likelihood lies at infinity for any sample size, and the adjusted profile score has multiple zeros. We argue that the parameters are local maximizers inside or on an ellipsoid centered at the maximum likelihood estimator.

Suggested Citation

  • Geert Dhaene & Koen Jochmans, 2013. "Likelihood inference in an Autoregression with fixed effects," Sciences Po publications 2013-07, Sciences Po.
  • Handle: RePEc:spo:wpmain:info:hdl:2441/dambferfb7dfprc9m052g20qh
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Chudik, Alexander & Pesaran, M. Hashem & Yang, Jui-Chung, 2016. "Half-panel jackknife fixed effects estimation of panels with weakly exogenous regressor," Globalization and Monetary Policy Institute Working Paper 281, Federal Reserve Bank of Dallas.
    2. repec:bla:obuest:v:79:y:2017:i:4:p:463-494 is not listed on IDEAS
    3. Jan Kiviet & Milan Pleus & Rutger Poldermans, 2017. "Accuracy and Efficiency of Various GMM Inference Techniques in Dynamic Micro Panel Data Models," Econometrics, MDPI, Open Access Journal, vol. 5(1), pages 1-54, March.
    4. Guangjie Li, 2015. "Consistency in Estimation and Model Selection of Dynamic Panel Data Models with Fixed Effects," Econometrics, MDPI, Open Access Journal, vol. 3(3), pages 1-31, July.
    5. Barbosa, José Diogo Valadares Moreira & Moreira, Marcelo J., 2017. "Likelihood inference and the role of initial conditions for the dynamic panel data model," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 788, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    6. Geert Dhaene & Koen Jochmans, 2015. "Split-panel Jackknife Estimation of Fixed-effect Models," Review of Economic Studies, Oxford University Press, vol. 82(3), pages 991-1030.
    7. Maurice J.G. Bun & Martin A. Carree & Artūras Juodis, 2017. "On Maximum Likelihood Estimation of Dynamic Panel Data Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(4), pages 463-494, August.
    8. Geert Dhaene & Koen Jochmans, 2015. "Profile-score adjustments for incidental-parameter problems," Sciences Po publications info:hdl:2441/323dml6suu9, Sciences Po.

    More about this item

    Keywords

    adjusted likelihood; autoregression; incidental parameters; local maximizer; recentered estimating equation;

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