Bootstrap Methods for Inference in the Parks Model

Mantobaye Moundigbaye, Clarisse Messemer, Richard W. Parks and W. Reed ()

Working Papers in Economics from University of Canterbury, Department of Economics and Finance

Abstract: The Parks (1967) estimator is a workhorse for panel data and seemingly unrelated regression equation systems because it allows the incorporation of serial correlation together with heteroskedasticity and cross-sectional correlation. Unfortunately, the associated, asymptotic standard error estimates are biased downward, often severely. To address this problem, Beck and Katz (1995) developed an approach that uses the Prais-Winsten estimator together with “panel corrected standard errors” (PCSE). While PCSE does not eliminate bias in the estimate of standard errors, its estimates are substantially less biased than Parks. The PCSE estimator has been, and continues to be, widely used. In this paper we develop both parametric and nonparametric bootstrap approaches for inference. We then illustrate the effectiveness of our procedures using Monte Carlo experiments. Up to this point, researchers working with panel datasets where the number of time periods was larger than the number of cross-sections had to sacrifice efficiency (Parks) for accuracy in hypothesis testing (PCSE). The bootstrapping procedures we develop here allow researchers to retain the efficient Parks estimator while producing test results that are superior to the PCSE estimator.

Keywords: Parks model; PCSE; SUR; panel data; cross-sectional correlation; bootstrap; Monte Carlo; simulation (search for similar items in EconPapers)
JEL-codes: C13 C15 C23 C33 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2017-11-01
New Economics Papers: this item is included in nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://repec.canterbury.ac.nz/cbt/econwp/1709.pdf (application/pdf)

Related works:
Journal Article: Bootstrap methods for inference in the Parks model (2020)
Working Paper: Bootstrap methods for inference in the Parks model (2019)
Working Paper: Bootstrap Methods for Inference in the Parks Model (2018)
Working Paper: Bootstrap Methods for Inference in the Parks Model (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:cbt:econwp:17/09

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