Reducing Bias of MLE in a Dynamic Panel Model

Jinyong Hahn and Hyungsik Moon ()

No 05.36, IEPR Working Papers from Institute of Economic Policy Research (IEPR)

Abstract: This paper investigates a simple dynamic linear panel regression model with both fixed effects and time effects. Using “large n and large T”asymptotics, we approximate the distribution of the fixed effect estimator of the autoregressive parameter in the dynamic linear panel model and derive its asymptotic bias. We find that the same higher order bias correction approach proposed by Hahn and Kuersteiner (2002) can be applied to the dynamic linear panel model even when time specific effects are present.

Pages: 15 pages
Date: 2005-09
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Related works:
Journal Article: REDUCING BIAS OF MLE IN A DYNAMIC PANEL MODEL (2006)
Working Paper: Reducing Bias of MLE in a Dynamic Panel Model (2004)
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