EconPapers    
Economics at your fingertips  
 

Dynamic linear panel regression models with interactive fixed effects

Hyungsik Roger Roger Moon and Martin Weidner

No 47/14, CeMMAP working papers from Institute for Fiscal Studies

Abstract: We analyze linear panel regression models with interactive fixed effects and predetermined regressors, e.g. lagged-dependent variables. The first order asymptotic theory of the least squares (LS) estimator of the regression coefficients is worked out in the limit where both the cross sectional dimension and the number of time periods become large. We find that there are two sources of asymptotic bias of the LS estimator: bias due to correlation or heteroscedasticity of the idiosyncratic error term, and bias due to predetermined (as opposed to strictly exogenous) regressors. A bias corrected least squares estimator is provided. We also present bias corrected versions of the three classical test statistics (Wald, LR and LM test) and show that their asymptotic distribution is a chi-square-distribution. Monte Carlo simulations show that the bias correction of the LS estimator and of the test statistics also work well for finite sample sizes.Supplementary material for this paper is available here.

Date: 2014-12-22
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.cemmap.ac.uk/wp-content/uploads/2020/08/CWP4714.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:azt:cemmap:47/14

DOI: 10.1920/wp.cem.2014.4714

Access Statistics for this paper

More papers in CeMMAP working papers from Institute for Fiscal Studies Contact information at EDIRC.
Bibliographic data for series maintained by Dermot Watson ().

 
Page updated 2025-03-19
Handle: RePEc:azt:cemmap:47/14