Heteroskedasticity and spatiotemporal dependence robust inference for linear panel models with fixed effects

Min Seong Kim and Yixiao Sun

Journal of Econometrics, 2013, vol. 177, issue 1, 85-108

Abstract: This paper studies robust inference for linear panel models with fixed effects in the presence of heteroskedasticity and spatiotemporal dependence of unknown forms. We propose a bivariate kernel covariance estimator that nests existing estimators as special cases. Our estimator improves upon existing estimators in terms of robustness, efficiency, and adaptiveness. For distributional approximations, we considered two types of asymptotics: the increasing-smoothing asymptotics and the fixed-smoothing asymptotics. Under the former asymptotics, the Wald statistic based on our covariance estimator converges to a chi-square distribution. Under the latter asymptotics, the Wald statistic is asymptotically equivalent to a distribution that can be well approximated by an F distribution. Simulation results show that our proposed testing procedure works well in finite samples.

Keywords: Adaptiveness; Panel HAC estimator; F-approximation; Fixed-smoothing asymptotics; Fixed-effects 2SLS; Increasing-smoothing asymptotics; Optimal bandwidth; Spatiotemporal dependence (search for similar items in EconPapers)
JEL-codes: C13 C14 C23 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

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Related works:
Working Paper: Heteroskedasticity and Spatiotemporal Dependence Robust Inference for Linear Panel Models with Fixed Effects (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:177:y:2013:i:1:p:85-108

DOI: 10.1016/j.jeconom.2013.07.002

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