Maximum Likelihood Estimation in Panels with Incidental Trends

Hyungsik R. Moon and Peter C. B. Phillip

Oxford Bulletin of Economics and Statistics, 1999, vol. 61, issue S1, 711-747

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→∞ and N→∞.

Date: 1999
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