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Using information criteria to select averages in CCE

journal contribution
posted on 2023-08-25, 04:50 authored by Luca Margaritella, Joakim WesterlundJoakim Westerlund
Summary In the interactive effects panel data literature information criteria are commonly used to consistently determine which of the estimated principal components factors to include. The present paper shows that the same approach can be applied to factors estimated by taking the cross-sectional averages of the observables, as prescribed by the popular common correlated effects (CCE) approach. This should be useful to practitioners because at the moment there is no other theory that justifies the use of information criteria in CCE.

History

Journal

ECONOMETRICS JOURNAL

ISSN

1368-4221

eISSN

1368-423X

Language

English

Publication classification

C1 Refereed article in a scholarly journal

Publisher

OXFORD UNIV PRESS