Using information criteria to select averages in CCE

Luca Margaritella and Joakim Westerlund

The Econometrics Journal, 2023, vol. 26, issue 3, 405-421

Abstract: SummaryIn the interactive effects panel data literature information criteria are commonly used to consistently determine which of the estimated principal components factors to include. The present paper shows that the same approach can be applied to factors estimated by taking the cross-sectional averages of the observables, as prescribed by the popular common correlated effects (CCE) approach. This should be useful to practitioners because at the moment there is no other theory that justifies the use of information criteria in CCE.

Keywords: CCE estimation; information criteria; interactive effects models; number of common factors (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:oup:emjrnl:v:26:y:2023:i:3:p:405-421.

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