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Nonparametric fixed effects model for panel data with locally stationary regressors

Youquan Pei, Tao Huang and Jinhong You

Journal of Econometrics, 2018, vol. 202, issue 2, 286-305

Abstract: We develop methods for inference in nonparametric time-varying fixed effects panel data models that allow for locally stationary regressors and for the time series length T and cross-section size N both being large. We first develop a pooled nonparametric profile least squares dummy variable approach to estimate the nonparametric function, and establish the optimal convergence rate and asymptotic normality of the resultant estimator. We then propose a test statistic to check whether the bivariate nonparametric function is time-varying or the time effect is separable, and derive the asymptotic distribution of the proposed test statistic. We present several simulated examples and two real data analyses to illustrate the finite sample performance of the proposed methods.

Keywords: Panel data models; Fixed effect; Locally stationary; Local linear estimation; Hypothesis testing (search for similar items in EconPapers)
JEL-codes: C12 C13 C14 C23 (search for similar items in EconPapers)
Date: 2018
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Journal of Econometrics is currently edited by T. Amemiya, A. R. Gallant, J. F. Geweke, C. Hsiao and P. M. Robinson

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Handle: RePEc:eee:econom:v:202:y:2018:i:2:p:286-305