A practical test for strict exogeneity in linear panel data models with fixed effects

Liangjun Su (), Yonghui Zhang and Jie Wei

Economics Letters, 2016, vol. 147, issue C, 27-31

Abstract: This paper provides a practical test for strict exogeneity in linear panel data models with fixed effects when the number of individuals N goes to infinity while the number of time periods T is fixed. The test is based on the supremum of a sequence of Wald test statistics. Under suitable conditions, we establish the asymptotic distribution of the test statistic and consistency of the test. A bootstrap procedure is proposed to improve the finite sample performance and the validity of the procedure is justified. We investigate the finite sample performance of the test via a small set of Monte Carlo simulations.

Keywords: Bootstrap; Fixed effects; Panel data; Strict exogeneity; Wald test (search for similar items in EconPapers)
JEL-codes: C12 C23 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:147:y:2016:i:c:p:27-31

DOI: 10.1016/j.econlet.2016.08.012

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