A Conditional Approach to Panel Data Models with Common Shocks

Giovanni Forchini and Bin Peng
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Bin Peng: Economics Discipline Group, University of Technology Sydney, Sydney 2007, Australia

Econometrics, 2016, vol. 4, issue 1, 1-12

Abstract: This paper studies the effects of common shocks on the OLS estimators of the slopes’ parameters in linear panel data models. The shocks are assumed to affect both the errors and some of the explanatory variables. In contrast to existing approaches, which rely on using results on martingale difference sequences, our method relies on conditional strong laws of large numbers and conditional central limit theorems for conditionally-heterogeneous random variables.

Keywords: factor structure; common shocks; conditional independence; conditional central limit theorem (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (3)

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