Structural Changes in Heterogeneous Panels with Endogenous Regressors

Badi Baltagi, Qu Feng and Chihwa Kao

No 214, Center for Policy Research Working Papers from Center for Policy Research, Maxwell School, Syracuse University

Abstract: This paper extends Pesaran (2006) common correlated e¤ects (CCE) by allowing for endogenous regressors in large heterogeneous panels with unknown common structural changes in slopes and error factor structure. Since endogenous regressors and structural breaks are often encountered in empirical studies with large panels, this extension makes the Pesaran’s (2006) CCE approach empirically more appealing. In addition to allowing for slope heterogeneity and cross-sectional dependence, we find that Pesaran’s CCE approach is also valid when dealing with unobservable factors in the presence of endogenous regressors and structural changes in slopes and error factor loadings. This is supported by Monte Carlo experiments.

Keywords: Structural Changes; Heterogeneous Panels; Common Correlated Effects; Endogeneity (search for similar items in EconPapers)
JEL-codes: C23 C33 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2019-04
New Economics Papers: this item is included in nep-ecm and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://surface.syr.edu/cpr/246/ (application/pdf)

Related works:
Journal Article: Structural changes in heterogeneous panels with endogenous regressors (2019)
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:max:cprwps:214

Access Statistics for this paper

More papers in Center for Policy Research Working Papers from Center for Policy Research, Maxwell School, Syracuse University 426 Eggers Hall, Syracuse, New York USA 13244-1020. Contact information at EDIRC.
Bibliographic data for series maintained by Katrina Fiacchi (kfiacchi@syr.edu).