Cross-sectional Dependence in Panel Data Analysis

Sarafidis, Vasilis and Wansbeek, Tom (2010): Cross-sectional Dependence in Panel Data Analysis.

Abstract

This paper provides an overview of the existing literature on panel data models with error cross-sectional dependence. We distinguish between spatial dependence and factor structure dependence and we analyse the implications of weak and strong cross-sectional dependence on the properties of the estimators. We consider estimation under strong and weak exogeneity of the regressors for both T fixed and T large cases. Available tests for error cross-sectional dependence and methods for determining the number of factors are discussed in detail. The finite-sample properties of some estimators and statistics are investigated using Monte Carlo experiments.

• Item Type: MPRA Paper
• Language: English
• Keywords: Panel data, Cross-sectional dependence, Spatial dependence, Factor structure, Strong/Weak exogeneity.
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C50 - General; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models

References

Sarafidis, V. and T. Wansbeek (2010) "Cross-sectional Dependence in Panel Data Analysis", mimeo, The University of Sydney.