Common correlated effect cross-sectional dependence corrections for non-linear conditional mean panel models
Sinem Hacioglu Hoke () and
George Kapetanios ()
Additional contact information
George Kapetanios: Kings College London, Postal: Kings College London
No 683, Bank of England working papers from Bank of England
This paper provides an approach to estimation and inference for non-linear conditional mean panel data models, in the presence of cross-sectional dependence. We modify the common correlated effects (CCE) correction of Pesaran (2006) to filter out the interactive unobserved multifactor structure. The estimation can be carried out using non-linear least squares, by augmenting the set of explanatory variables with cross-sectional averages of both linear and non-linear terms. We propose pooled and mean group estimators, derive their asymptotic distributions, and show the consistency and asymptotic normality of the coefficients of the model. The features of the proposed estimators are investigated through extensive Monte Carlo experiments. We apply our method to estimate UK banks’ wholesale funding costs and explore the non-linear relationship between public debt and output growth.
Keywords: Non-linear panel data model; cross-sectional dependence; common correlated effects estimator (search for similar items in EconPapers)
JEL-codes: C31 C33 C51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://www.bankofengland.co.uk/-/media/boe/files/ ... 8B53215DDCFB6DB1F17D Full text (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0683
Access Statistics for this paper
More papers in Bank of England working papers from Bank of England Bank of England, Threadneedle Street, London, EC2R 8AH. Contact information at EDIRC.
Bibliographic data for series maintained by Digital Media Team ().