Sarafidis, Vasilis (2009): GMM Estimation of short dynamic panel data models with error cross-sectional dependence.
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This paper considers estimation of short dynamic panel data models with error cross-sectional dependence. It is shown that under spatially correlated errors, an additional, generally non-redundant, set of moment conditions becomes available for each i - specifically, instruments with respect to the individual(s) which unit i is spatially correlated with. We demonstrate that these moment conditions remain valid when the error term contains a common factor component, in which situation the standard moment conditions with respect to individual i itself are invalidated, and thereby the standard dynamic panel GMM estimators are inconsistent. The resulting estimators are computationally attractive and do not require estimating the number of unobserved factors. Simulated experiments show that the resulting method of moments estimators perform well in terms of both median bias and root median square error.
|Item Type:||MPRA Paper|
|Original Title:||GMM Estimation of short dynamic panel data models with error cross-sectional dependence|
|Keywords:||Dynamic panel data, spatial dependence, factor structure dependence, Generalised Method of Moments|
|Subjects:||C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: General
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C33 - Models with Panel Data; Longitudinal Data; Spatial Time Series
|Depositing User:||Vasilis Sarafidis|
|Date Deposited:||25. Jan 2012 02:41|
|Last Modified:||12. Feb 2013 14:57|
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Available Versions of this Item
GMM Estimation of Short Dynamic Panel Data Models With Error Cross-Sectional Dependence. (deposited 20. Sep 2010 16:41)
- GMM Estimation of short dynamic panel data models with error cross-sectional dependence. (deposited 25. Jan 2012 02:41) [Currently Displayed]