Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/286584 
Year of Publication: 
2023
Citation: 
[Journal:] SERIEs - Journal of the Spanish Economic Association [ISSN:] 1869-4195 [Volume:] 14 [Issue:] 3/4 [Year:] 2023 [Pages:] 435-461
Publisher: 
Springer, Heidelberg
Abstract: 
This paper revisits the panel autoregressive model, with a primary emphasis on the unit-root case. We study a class of misspecified Random effects Maximum Likelihood (mRML) estimators when T is either fixed or large, and N tends to infinity. We show that in the unit-root case, for any fixed value of T, the log-likelihood function of the mRML estimator has a single mode at unity as . Furthermore, the Hessian matrix of the corresponding log-likelihood function is non-singular, unless the scaled variance of the initial condition is exactly zero. As a result, mRML is consistent and asymptotically normally distributed as N tends to infinity. In the large-T setup, it is shown that mRML is asymptotically equivalent to the bias-corrected FE estimator of Hahn and Kuersteiner (Econometrica 70(4):1639-1657, 2002). Moreover, under certain conditions, its Hessian matrix remains non-singular.
Subjects: 
Dynamic panel data
Maximum likelihood
Monte Carlo simulation
JEL: 
C13
C33
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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