A PORTMANTEAU TEST FOR CORRELATION IN SHORT PANELS

Koen Jochmans

Econometric Theory, 2020, vol. 36, issue 6, 1159-1166

Abstract: Inoue and Solon (2006, Econometric Theory 22, 835–851) presented a test against serial correlation of arbitrary form in fixed-effect models for short panel data. Implementing the test requires choosing a regularization parameter that may severely affect power and for which no optimal selection rule is available. We present a modified version of their test that does not require any regularization parameter. Asymptotic power calculations illustrate the improvement of our procedure. An extension of the approach that accommodates dynamic models is also provided.

Date: 2020
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Working Paper: A Portmanteau Test for Correlation in Short Panels (2018)
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