Mean Group Instrumental Variable Estimation of Time-Varying Large Heterogeneous Panels with Endogenous Regressors

Yu Bai (), Massimiliano Marcellino and George Kapetanios

No 13/23, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: The large heterogeneous panel data models are extended to the setting where the heterogenous coefficients are changing over time and the regressors are endogenous. Kernel-based non-parametric timevarying parameter instrumental variable mean group (TVP-IV-MG) estimator is proposed for the timevarying cross-sectional mean coefficients. The uniform consistency is shown and the pointwise asymptotic normality of the proposed estimator is derived. A data-driven bandwidth selection procedure is also proposed. The finite sample performance of the proposed estimator is investigated through a Monte Carlo study and an empirical application on multi-country Phillips curve with time-varying parameters.

Keywords: large heterogeneous panels; non-parametric methods; time-varying parameters; mean group estimator (search for similar items in EconPapers)
JEL-codes: C14 C26 C51 (search for similar items in EconPapers)
Pages: 28
Date: 2023
New Economics Papers: this item is included in nep-ecm
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