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On the estimation and inference in factor-augmented panel regressions with correlated loadings

journal contribution
posted on 2013-06-01, 00:00 authored by Joakim WesterlundJoakim Westerlund, J P Urbain
In an influential paper, Pesaran [Pesaran, M.H. (2006). Estimation and inference in large heterogeneous panels with a multifactor error structure. Econometrica 74, 967–1012] proposes a very simple estimator of factor-augmented regressions that has since then become very popular. In this note we demonstrate how the presence of correlated factor loadings can render this estimator inconsistent.

History

Journal

Economics letters

Volume

119

Issue

3

Pagination

247 - 250

Publisher

Elsevier

Location

Amsterdam, The Netherlands

ISSN

0165-1765

eISSN

1873-7374

Language

eng

Publication classification

C1 Refereed article in a scholarly journal

Copyright notice

2013, Elsevier