Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/102205
Authors: 
Hayakawa, Kazuhiko
Pesaran, M. Hashem
Smith, L. Vanessa
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 4822
Abstract: 
This paper proposes the transformed maximum likelihood estimator for short dynamic panel data models with interactive fixed effects, and provides an extension of Hsiao et al. (2002) that allows for a multifactor error structure. This is an important extension since it retains the advantages of the transformed likelihood approach, whilst at the same time allows for observed factors (fixed or random). Small sample results obtained from Monte Carlo simulations show that the transformed ML estimator performs well in finite samples and outperforms the GMM estimators proposed in the literature in almost all cases considered.
Subjects: 
short T dynamic panels
transformed maximum likelihood
multi-factor error structure
interactive fixed effects
JEL: 
C12
C13
C23
Document Type: 
Working Paper

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