On the estimation and inference in factor-augmented panel regressions with correlated loadings

Joakim Westerlund and Jean-Pierre Urbain

Economics Letters, 2013, vol. 119, issue 3, 247-250

Abstract: In an influential paper, Pesaran [Pesaran, M.H. (2006). Estimation and inference in large heterogeneous panels with a multifactor error structure. Econometrica 74, 967–1012] proposes a very simple estimator of factor-augmented regressions that has since then become very popular. In this note we demonstrate how the presence of correlated factor loadings can render this estimator inconsistent.

Keywords: Factor-augmented panel regressions; Common factor models; Cross-sectional averages; Cross-sectional dependence (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 (116)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176513001316
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:119:y:2013:i:3:p:247-250

DOI: 10.1016/j.econlet.2013.03.022

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().