Maximum Likelihood Estimation in Panels with Incidental Trends

Hyungsik Moon () and Peter Phillips

No 1246, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: It is shown that the maximum likelihood estimator of a local to unity parameter can be consistently estimated with panel data when the cross section observations are independent. Consistency applies when there are no deterministic trends or when there is a homogeneous deterministic trend in the panel model. When there are heterogeneous deterministic trends the panel MLE of the local to unity parameter is inconsistent. This outcome provides a new instance of inconsistent ML estimation in dynamic panels, and, unlike earlier results of this type, applies when both T approaches infinity and N approaches infinity.

Keywords: Deterministic trends; dynamic panels; incidental parameters; inconsistent maximum likelihood estimator; local to unity; nonstationary panel data (search for similar items in EconPapers)
JEL-codes: C32 C33 (search for similar items in EconPapers)
Pages: 30 pages
Date: 1999-12
Note: CFP 999.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Published in Oxford Bulletin of Economics and Statistics, Special Issue (1999), 61: 711-747

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