A further look at Modified ML estimation of the panel AR(1) model with fixed effects and arbitrary initial conditions

Hugo Kruiniger

Papers from arXiv.org

Abstract: In this paper we consider two kinds of generalizations of Lancaster's (Review of Economic Studies, 2002) Modified ML estimator (MMLE) for the panel AR(1) model with fixed effects and arbitrary initial conditions and possibly covariates when the time dimension, T, is fixed. When the autoregressive parameter rho=1, the limiting modified profile log-likelihood function for this model has a stationary point of inflection, and rho is first-order underidentified but second-order identified. We show that the generalized MMLEs exist w.p.a.1. and are uniquely defined w.p.1. and consistent for any value of |rho| =

Date: 2025-08
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