Large sample properties of an IV estimator based on the Ahn and Schmidt moment conditions

Andrew Adrian Yu Pua, Markus Fritsch and Joachim Schnurbus

No B-37-19, Passauer Diskussionspapiere, Betriebswirtschaftliche Reihe from University of Passau, Faculty of Business and Economics

Abstract: We propose an instrumental variables (IV) estimator based on nonlinear (in param- eters) moment conditions for estimating linear dynamic panel data models and derive the large sample properties of the estimator. We assume that the only explanatory variable in the model is one lag of the dependent variable and consider the setting where the absolute value of the true lag parameter is smaller or equal to one, the cross section dimension is large, and the time series dimension is either fixed or large. Estimation of the lag parameter involves solving a quadratic equation and we find that the lag parameter is point identified in the unit root case; otherwise, two distinct roots (solutions) result. We propose a selection rule that identifies the consistent root asymptotically in the latter case and derive the asymptotic distribution of the estimator for the unit root case and for the case when the absolute value of the lag parameter is smaller than one.

Keywords: panel data; linear dynamic model; quadratic moment conditions; instrumental variables; large sample properties (search for similar items in EconPapers)
JEL-codes: C23 C26 (search for similar items in EconPapers)
Date: 2019
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 (1)

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