Panel Estimation for Worriers

Markus Eberhardt and Anindya Banerjee and J. James Reade
Authors registered in the RePEc Author Service: Anindya Banerjee and J James Reade

No 514, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: The recent blossoming of panel econometrics in general and panel time-series methods in particular has enabled many more research questions to be investigated than before. However, this development has not assuaged serious concerns over the lack of diagnostic testing procedures in panel econometrics, in particular vis-a-vis the prominence of such practices in the time-series domain: the recent introduction of residual cross-section independence tests aside, within mainstream panel empirics the combination of 'model', 'spefication' and 'testing' typically refers to the distinction between fixed and random effects, as opposed to a rigorous investigation of residual properties. In this paper we investigate these issues in the context of non-stationary panels with multifactor error structure, employing Monte Carlo simulations to investigate the distributions and rejection frequencies for standard time-series diagnostic procedures, including tests for residual autocorrelation, ARCH, normality, heteroskedasticity and functional form.

Keywords: Panel time-series; residual diagnostics; common factor model (search for similar items in EconPapers)
JEL-codes: C12 C22 C23 (search for similar items in EconPapers)
Date: 2010-11-01
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Working Paper: Panel Estimation for Worriers (2010)
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