Panel Estimation for Worriers

Aninday Banerjee, Markus Eberhardt and J Reade

Discussion Papers from Department of Economics, University of Birmingham

Abstract: The recent blossoming of panel econometrics in general and panel time-series methods in particular has enabled many more research questions to be investigated than before. However, this development has not assuaged serious concerns over the lack of diagnostic testing procedures in panel econometrics, in particular vis-a-vis the prominence of such practices in the time-series domain: the recent introduction of residual cross-section independence tests aside, within mainstream panel empirics the combination of 'model', 'specification' and 'testing' typically refers to the distinction between fixed and random effects, as opposed to a rigorous investigation of residual properties. In this paper we investigate these issues in the context of non-stationary panels with multifactor error structure, employing Monte Carlo simulations to investigate the distributions and rejection frequencies for standard time-series diagnostic procedures, including tests for residual autocorrelation, ARCH, normality, heteroskedasticity and functional form.

Keywords: Panel time-series; Residual Diagnostics; Common Factor Model (search for similar items in EconPapers)
JEL-codes: C12 C22 C23 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2010-11
References: Add references at CitEc
Citations: View citations in EconPapers (16)

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https://repec.cal.bham.ac.uk/pdf/10-33.pdf

Related works:
Working Paper: Panel Estimation for Worriers (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:bir:birmec:10-33

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