Too much or too little? New tools for the CCE estimator

Jan Ditzen

Northern European Stata Conference 2024 from Stata Users Group

Abstract: This talk will cover new developments in the literature of common correlated effects (CCE) and their implementation into Stata. First, I will discuss regularized CCE (Juodis, 2022, Journal of Applied Econometrics). CCE is known to be sensitive to the selection of the number of cross-section averages. rCCE overcomes the problem by regularizing the cross-section averages. Second, I will discuss the test for the rank condition based on DeVos, Everaert, and Sarafidis (2024, Econometrics Reviews). If the rank condition fails, CCE will be inconsistent, and therefore testing the condition is key for any empirical application. Finally, I will discuss the selection of cross-section averages using the information criteria from Karabiyik, Urbain, and Westerlund (2019, Journal of Applied Econometrics) and Margaritella and Westerlund (2023, Econometrics Journal).

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http://repec.org/neur2024/Northern_Europe24_Ditzen.pdf presentation materials (application/pdf)

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Working Paper: Too much or too little? New tools for the CCE estimator (2024)
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