Bias-Corrected Common Correlated Effects Pooled Estimation In Homogeneous Dynamic Panels
(2016) In Working Paper- Abstract
- This paper extends the Common Correlated Effects Pooled (CCEP) estimator to homogeneous dynamic panels. In this setting CCEP suffers from a large bias when the time series dimension (T) is fixed. We develop a bias-corrected estimator that is valid for a multi-factor error structure provided that a sufficient number of cross-sectional averages, and lags thereof, are added to the model. We show that the resulting CCEPbc estimator is consistent as the number of cross-sections (N) tends to infinity, both for T fixed or growing large. Monte Carlo experiments show that our correction offers strong improvements in terms of bias and variance.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/868238b6-4f7f-40c6-80d2-7905ec6b756e
- author
- De Vos, Ignace LU and Everaert, Gerdie
- publishing date
- 2016
- type
- Working paper/Preprint
- publication status
- published
- subject
- keywords
- Factor augmented regression, multi-factor error structure, dynamic panel bias
- in
- Working Paper
- issue
- 2016/920
- language
- English
- LU publication?
- no
- id
- 868238b6-4f7f-40c6-80d2-7905ec6b756e
- date added to LUP
- 2018-11-08 15:39:38
- date last changed
- 2019-09-03 16:15:16
@misc{868238b6-4f7f-40c6-80d2-7905ec6b756e, abstract = {{This paper extends the Common Correlated Effects Pooled (CCEP) estimator to homogeneous dynamic panels. In this setting CCEP suffers from a large bias when the time series dimension (T) is fixed. We develop a bias-corrected estimator that is valid for a multi-factor error structure provided that a sufficient number of cross-sectional averages, and lags thereof, are added to the model. We show that the resulting CCEPbc estimator is consistent as the number of cross-sections (N) tends to infinity, both for T fixed or growing large. Monte Carlo experiments show that our correction offers strong improvements in terms of bias and variance.}}, author = {{De Vos, Ignace and Everaert, Gerdie}}, keywords = {{Factor augmented regression; multi-factor error structure; dynamic panel bias}}, language = {{eng}}, note = {{Working Paper}}, number = {{2016/920}}, series = {{Working Paper}}, title = {{Bias-Corrected Common Correlated Effects Pooled Estimation In Homogeneous Dynamic Panels}}, year = {{2016}}, }