Modeling panels of intercorrelated autoregressive time series

Vidar Hjellvik and Dag Tjostheim

No 1998,42, SFB 373 Discussion Papers from Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes

Abstract: We propose a method of modeling panel time series data with both inter- and intra-individual correlation, and of fitting an autoregressive model to such data. Estimates are obtained by a conditional likelihood argument. If there are few observations in each series, the estimates can be dramatically improved by Burg-type estimates taking edge effects into account. The consequences of ignoring the intercorrelation term are analysed. Partial lack of consistency is demonstrated in this situation. Moreover, a break-even point is found for the strength of the intercorrelation, beyond which a conventional estimate, ignoring correlation, will become increasingly inferior. Asymptotic normality of estimators is established, and our results are illustrated on a real data example, where it is seen that choosing the right type of estimate is of crucial importance.

Keywords: Time series; Autoregressive; Burg-type estimates; Intercorrelated; Panel data (search for similar items in EconPapers)
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb373:199842

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