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On the role of the rank condition in CCE estimation of factor-augmented panel regressions

Karabiyik, Hande, Reese, Simon and Westerlund, Joakim 2017, On the role of the rank condition in CCE estimation of factor-augmented panel regressions, Journal of econometrics, vol. 197, no. 1, pp. 60-64, doi: 10.1016/j.jeconom.2016.10.006.

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Title On the role of the rank condition in CCE estimation of factor-augmented panel regressions
Author(s) Karabiyik, Hande
Reese, Simon
Westerlund, Joakim
Journal name Journal of econometrics
Volume number 197
Issue number 1
Start page 60
End page 64
Total pages 5
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2017-03
ISSN 0304-4076
1872-6895
Keyword(s) Factor-augmented panel regression
CCE estimation
Moore–Penrose inverse
Summary A popular approach to factor-augmented panel regressions is the common correlated effects (CCE) estimator of Pesaran (2006). This paper points to a problem with the CCE approach that appears in the empirically relevant case when the number of factors is strictly less than the number of observables used in their estimation. Specifically, the use of too many observables causes the second moment matrix of the estimated factors to become asymptotically singular, an issue that has not yet been appropriately accounted for. The purpose of the present paper is to fill this gap in the literature.
Language eng
DOI 10.1016/j.jeconom.2016.10.006
Field of Research 140399 Econometrics not elsewhere classified
1403 Econometrics
Socio Economic Objective 970114 Expanding Knowledge in Economics
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2016, Elsevier
Persistent URL http://hdl.handle.net/10536/DRO/DU:30090750

Document type: Journal Article
Collection: Department of Economics
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