Common Correlated Effects Estimation for Dynamic Heterogeneous Panels with Non-Stationary Multi-Factor Error Structures
In this paper, we consider the estimation of a dynamic panel data model with non-stationary multi-factor error structures. We adopted the common correlated effect (CCE) estimation and established the asymptotic properties of the CCE and common correlated effects mean group (CCEMG) estimators, as <...
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2022-08-01
|
| Series: | Econometrics |
| Subjects: | |
| Online Access: | https://www.mdpi.com/2225-1146/10/3/29 |
| _version_ | 1797489263946760192 |
|---|---|
| author | Shiyun Cao Qiankun Zhou |
| author_facet | Shiyun Cao Qiankun Zhou |
| author_sort | Shiyun Cao |
| collection | DOAJ |
| description | In this paper, we consider the estimation of a dynamic panel data model with non-stationary multi-factor error structures. We adopted the common correlated effect (CCE) estimation and established the asymptotic properties of the CCE and common correlated effects mean group (CCEMG) estimators, as <i>N</i> and <i>T</i> tend to infinity. The results show that both the CCE and CCEMG estimators are consistent and the CCEMG estimator is asymptotically normally distributed. The theoretical findings were supported for small samples by an extensive simulation study, showing that the CCE estimators are robust to a wide variety of data generation processes. Empirical findings suggest that the CCE estimation is widely applicable to models with non-stationary factors. The proposed procedure is also illustrated by an empirical application to analyze the U.S. cigar dataset. |
| first_indexed | 2024-03-10T00:14:02Z |
| format | Article |
| id | doaj.art-63cc00fdd3a14b87b75f8adfa8296fb5 |
| institution | Directory Open Access Journal |
| issn | 2225-1146 |
| language | English |
| last_indexed | 2024-03-10T00:14:02Z |
| publishDate | 2022-08-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Econometrics |
| spelling | doaj.art-63cc00fdd3a14b87b75f8adfa8296fb52023-11-23T15:54:44ZengMDPI AGEconometrics2225-11462022-08-011032910.3390/econometrics10030029Common Correlated Effects Estimation for Dynamic Heterogeneous Panels with Non-Stationary Multi-Factor Error StructuresShiyun Cao0Qiankun Zhou1School of Science, Guangxi University of Science and Technology, Liuzhou 545006, ChinaDepartment of Economics, Louisiana State University, Baton Rouge, LA 70803, USAIn this paper, we consider the estimation of a dynamic panel data model with non-stationary multi-factor error structures. We adopted the common correlated effect (CCE) estimation and established the asymptotic properties of the CCE and common correlated effects mean group (CCEMG) estimators, as <i>N</i> and <i>T</i> tend to infinity. The results show that both the CCE and CCEMG estimators are consistent and the CCEMG estimator is asymptotically normally distributed. The theoretical findings were supported for small samples by an extensive simulation study, showing that the CCE estimators are robust to a wide variety of data generation processes. Empirical findings suggest that the CCE estimation is widely applicable to models with non-stationary factors. The proposed procedure is also illustrated by an empirical application to analyze the U.S. cigar dataset.https://www.mdpi.com/2225-1146/10/3/29dynamic panel modelscross-sectional dependencenon-stationarycommon factorscommon correlated effects |
| spellingShingle | Shiyun Cao Qiankun Zhou Common Correlated Effects Estimation for Dynamic Heterogeneous Panels with Non-Stationary Multi-Factor Error Structures Econometrics dynamic panel models cross-sectional dependence non-stationary common factors common correlated effects |
| title | Common Correlated Effects Estimation for Dynamic Heterogeneous Panels with Non-Stationary Multi-Factor Error Structures |
| title_full | Common Correlated Effects Estimation for Dynamic Heterogeneous Panels with Non-Stationary Multi-Factor Error Structures |
| title_fullStr | Common Correlated Effects Estimation for Dynamic Heterogeneous Panels with Non-Stationary Multi-Factor Error Structures |
| title_full_unstemmed | Common Correlated Effects Estimation for Dynamic Heterogeneous Panels with Non-Stationary Multi-Factor Error Structures |
| title_short | Common Correlated Effects Estimation for Dynamic Heterogeneous Panels with Non-Stationary Multi-Factor Error Structures |
| title_sort | common correlated effects estimation for dynamic heterogeneous panels with non stationary multi factor error structures |
| topic | dynamic panel models cross-sectional dependence non-stationary common factors common correlated effects |
| url | https://www.mdpi.com/2225-1146/10/3/29 |
| work_keys_str_mv | AT shiyuncao commoncorrelatedeffectsestimationfordynamicheterogeneouspanelswithnonstationarymultifactorerrorstructures AT qiankunzhou commoncorrelatedeffectsestimationfordynamicheterogeneouspanelswithnonstationarymultifactorerrorstructures |