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On estimation and inference in heterogeneous panel regressions with interactive effects

journal contribution
posted on 2019-09-01, 00:00 authored by Joakim WesterlundJoakim Westerlund
Among the existing estimators of interactive effects (IEs) regressions, the common correlated effects (CCE) approach is probably the most popular. A major reason for this popularity is the generality of the approach. In fact, CCE is remarkably general in that it allows ample parameter heterogeneity without placing any restrictions on the true number of common factors. In the present paper, we show that this generality is not unique to CCE but that it is shared by a whole class of estimators. We characterize this class and show that it does not rely on the correct specification of the IEs. In spite of this, the estimators within the class are consistent and asymptotically normal under general conditions. This means that there is not just CCE but, in fact, many estimators to choose from, such as the fixed effects estimator.

History

Journal

Journal of time series analysis

Volume

40

Issue

5

Pagination

852 - 857

Publisher

Wiley

Location

Chichester, Eng.

ISSN

0143-9782

eISSN

1467-9892

Language

eng

Publication classification

C1 Refereed article in a scholarly journal

Copyright notice

2018, John Wiley & Sons