A Two-Stage Estimator for Heterogeneous Panel Models with Common Factors

Carolina Castagnetti, Eduardo Rossi and Lorenzo Trapani ()

No 66, DEM Working Papers Series from University of Pavia, Department of Economics and Management

Abstract: This paper considers estimation in a stationary heterogeneous panel model where common unknown factors are present. A two-stage estimator is proposed. This estimator is based on the CCE estimator (Pesaran, 2006) in the first stage and on a similar approach to the Interactive Effect estimator (Bai, 2009) in the second stage. The asymptotic properties of this estimator are provided alongside of the comparative finite-sample properties of a range of estimators by means of Monte Carlo experiments.

Keywords: Large panels; Factor error structure; Principal components; Common regressors; Cross-section dependence (search for similar items in EconPapers)
JEL-codes: C33 C38 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2014-01
New Economics Papers: this item is included in nep-ecm and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: A two-stage estimator for heterogeneous panel models with common factors (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:pav:demwpp:demwp0066

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