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Full-Text Articles in Social and Behavioral Sciences
Bias In Dynamic Panel Estimation With Fixed Effects, Incidental Trends And Cross Section Dependence, Peter C. B. Phillips, Donggyu Sul
Bias In Dynamic Panel Estimation With Fixed Effects, Incidental Trends And Cross Section Dependence, Peter C. B. Phillips, Donggyu Sul
Research Collection School Of Economics
Explicit asymptotic bias formulae are given for dynamic panel regression estimators as the cross section sample size N --> ∞. The results extend earlier work by Nickell [1981. Biases in dynamic models with fixed effects. Econometrica 49, 1417-1426] and later authors in several directions that are relevant for practical work, including models with unit roots, deterministic trends, predetermined and exogenous regressors, and errors that may be cross sectionally dependent. The asymptotic bias is found to be so large when incidental linear trends are fitted and the time series sample size is small that it changes the sign of the autoregressive …
Indirect Inference For Dynamic Panel Models, Christian Gourieroux, Peter C. B. Phillips, Jun Yu
Indirect Inference For Dynamic Panel Models, Christian Gourieroux, Peter C. B. Phillips, Jun Yu
Research Collection School Of Economics
Maximum likelihood (ML) estimation of the autoregressive parameter of a dynamic panel data model with fixed effects is inconsistent under fixed time series sample size and large cross section sample size asymptotics. This paper proposes a general, computationally inexpensive method of bias reduction that is based on indirect inference, shows unbiasedness and analyzes efficiency. Monte Carlo studies show that our procedure achieves substantial bias reductions with only mild increases in variance, thereby substantially reducing root mean square errors. The method is compared with certain consistent estimators and is shown to have superior finite sample properties to the generalized method of …