RT Journal Article
T1 Persistence Heterogeneity Testing in Panels with Interactive Fixed Effects
A1 Ergemen, Yunus Emre
A1 Velasco, Carlos
AB We consider large N, T panel data models with fixed e↵ects, a common factor allowingfor cross-section dependence, and persistent data and shocks, which are assumedfractionally integrated. In a basic setup, the main interest is on the fractional parameterof the idiosyncratic component, which is estimated in first di↵erences after factorremoval by projection on the cross-section average. The pooled conditional-sum-ofsquaresestimate is pNT consistent but the normal asymptotic distribution might notbe centered, requiring the time series dimension to grow faster than the cross-sectionsize for correction. We develop tests of homogeneity of dynamics, including the degreeof integration, which have no trivial power under local departures from the null hypothesisof a non-negligible fraction of cross-section units. A simulation study showsthat our estimates and tests have good performance even in moderately small panels.
PB Wiley
SN 0143-9782
YR 2019
FD 2019-07-01
LK https://hdl.handle.net/10016/34509
UL https://hdl.handle.net/10016/34509
LA eng
NO Financial support from CREATES, Center for Research in Econometric Analysis of Time Series (DNRF78),funded by the Danish National Research Foundation, is gratefully acknowledged (Y.E.E.). Financial support from the Spanish Ministerio de Economía y Competitividad (grants ECO2016-78652 and ECO2017-86009-P,ECO2014-57007p and MDM 2014-0431), and Comunidad de Madrid, MadEco-CM (S2015/HUM-3444) is gratefully acknowledged (C.V.)
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RD 1 sept. 2024