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dc.contributor.authorPesaran, Mohammad Hashemen_US
dc.date.accessioned2009-01-28T15:52:14Z-
dc.date.available2009-01-28T15:52:14Z-
dc.date.issued2004en_US
dc.identifier.urihttp://hdl.handle.net/10419/18696-
dc.description.abstractThis paper presents a new approach to estimation and inference in panel data models with a multifactor error structure where the unobserved common factors are (possibly) correlated with exogenously given individual-specific regressors, and the factor loadings differ over the cross section units. The basic idea behind the proposed estimation procedure is to filter the individual-specific regressors by means of (weighted) cross-section aggregates such that asymptotically as the cross-section dimension (N) tends to infinity the differential effects of unobserved common factors are eliminated. The estimation procedure has the advantage that it can be computed by OLS applied to an auxiliary regression where the observed regressors are augmented by (weighted) cross sectional averages of the dependent variable and the individual specific regressors. Two different but related problems are addressed: one that concerns the coefficients of the individual-specific regressors, and the other that focusses on the mean of the individual coefficients assumed random. In both cases appropriate estimators, referred to as common correlated effects (CCE) estimators, are proposed and their asymptotic distribution as N tends to infinity, with T (the time-series dimension) fixed or as N and T tends to infinity (jointly) are derived under different regularity conditions. One important feature of the proposed CCE mean group (CCEMG) estimator is its invariance to the (unknown but fixed) number of unobserved common factors as N and T tends to infinity (jointly). The small sample properties of the various pooled estimators are investigated by Monte Carlo experiments that confirm the theoretical derivations and show that the pooled estimators have generally satisfactory small sample properties even for relatively small values of N and T.en_US
dc.language.isoengen_US
dc.relation.ispartofseriesCESifo working papers 1331en_US
dc.subject.jelC33en_US
dc.subject.jelC12en_US
dc.subject.jelC13en_US
dc.subject.ddc330en_US
dc.subject.keywordcross section dependenceen_US
dc.subject.keywordlarge panelsen_US
dc.subject.keywordcommon correlated effectsen_US
dc.subject.keywordheterogeneityen_US
dc.subject.keywordestimation and inferenceen_US
dc.subject.stwSchätztheorieen_US
dc.subject.stwInferenzstatistiken_US
dc.subject.stwPanelen_US
dc.subject.stwTheorieen_US
dc.titleEstimation and inference in large heterogeneous panels with a multifactor error structureen_US
dc.typeWorking Paperen_US
dc.identifier.ppn477413099en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
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