A Simple Efficient Instrumental Variable Estimator in Panel AR(p) Models

Kazuhiko Hayakawa

Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: In this paper, we show that for panel AR(p) models with iid errors, an instrumental variable (IV) estimator with instruments in the backward orthogonal deviation has the same asymptotic distribution as the infeasible optimal IV estimator when both N and T, the dimensions of the cross section and the time series, are large. If we assume that the errors are normally distributed, the asymptotic variance of the proposed IV estimator is shown to attain the lower bound when both N and T are large. A simulation study is conducted to assess the estimator.

Keywords: panel AR(p) models; the optimal instruments; the backward orthogonal deviation (search for similar items in EconPapers)
JEL-codes: C12 C23 (search for similar items in EconPapers)
Date: 2007-05
New Economics Papers: this item is included in nep-ecm and nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:hst:hstdps:d07-213

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