On the implementation and use of factor-augmented regressions in panel data

Joakim Westerlund and Jean-Pierre Urbain

Journal of Asian Economics, 2013, vol. 28, issue C, 3-11

Abstract: Practitioners are generally well aware of the fact that most standard approaches for estimation and inference in panel data regressions are based on assuming that the cross-sectional units are independent of each other, an assumption that is surely mistaken in applications, especially in macroeconomics and finance. Yet, applications involving anything but these standard approaches are very rare. The current paper can be seen as a reaction to this. The purpose is to point to some of the recent advances in the area of factor-augmented panel regressions, and to also provide some guidance regarding their implementation.

Keywords: Factor-augmented panel regressions; Principal components; Cross-sectional averages; China; Predictive regression (search for similar items in EconPapers)
JEL-codes: C12 C13 C33 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (73)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:28:y:2013:i:c:p:3-11

DOI: 10.1016/j.asieco.2013.02.002

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