Recursive estimation in large panel data models: Theory and practice

Bin Jiang, Yanrong Yang, Jiti Gao and Cheng Hsiao

Journal of Econometrics, 2021, vol. 224, issue 2, 439-465

Abstract: Bai (2009) proposes recursive estimation for panel data models with interactive effects. We study the behaviours of this recursive estimator. The recursive formula is established that shows the behaviours of recursive estimators depend on the initial estimator, the population structure and the iterative steps. Under some general scenarios, we find that the recursive estimator becomes consistent after the first iteration from any initials. We also obtain the optimal number of iterative steps under some prescribed conditions. The central limit theorem of the recursive estimator is established when the initial estimator is OLS. Various simulations are conducted to support our theoretical findings.

Keywords: Factor model; Initial estimation; Multiplicative structure; Nonlinear optimization (search for similar items in EconPapers)
JEL-codes: C13 C33 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Working Paper: Recursive estimation in large panel data models: Theory and practice (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:224:y:2021:i:2:p:439-465

DOI: 10.1016/j.jeconom.2020.07.055

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