Bai, Jushan and Li, Kunpeng (2010): Theory and methods of panel data models with interactive effects.

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Abstract
This paper considers the maximum likelihood estimation of the panel data models with interactive effects. Motivated in economics and other social sciences, a notable feature of the model is that the explanatory variables are correlated with the unobserved effects. The usual withingroup estimator is inconsistent. Existing methods for consistent estimation are either designed for panel data with short time periods or are less efficient. The maximum likelihood estimator has desirable properties and is easy to implement, as illustrated by the Monte Carlo simulations. This paper develops the inferential theory for the maximum likelihood estimator, including consistency, rate of convergence and the limiting distributions. We further extend the model to include timeinvariant regressors and common regressors (crosssection invariant). The regression coefficients for the timeinvariant regressors are timevarying, and the coefficients for the common regressors are crosssectionally varying.
Item Type:  MPRA Paper 

Original Title:  Theory and methods of panel data models with interactive effects 
Language:  English 
Keywords:  factor error structure; factors; factor loadings; maximum likelihood; principal components; withingroup estimator; simultaneous equations; 
Subjects:  C  Mathematical and Quantitative Methods > C3  Multiple or Simultaneous Equation Models ; Multiple Variables C  Mathematical and Quantitative Methods > C3  Multiple or Simultaneous Equation Models ; Multiple Variables > C33  Panel Data Models ; Spatiotemporal Models 
Item ID:  43441 
Depositing User:  Kunpeng Li 
Date Deposited:  29 Jan 2013 10:35 
Last Modified:  26 Sep 2019 21:29 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/43441 