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A simple new test for slope homogeneity in panel data models with interactive effects

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  • Ando, Tomohiro
  • Bai, Jushan

Abstract

We consider the problem of testing for slope homogeneity in high-dimensional panel data models with a factor error structure. We consider the Swamy-type test for slope homogeneity by incorporating interactive fixed effects. We show that the proposed test statistic is asymptotically normal. Our test allows the explanatory variables to be correlated with the unobserved factors, factor loadings, or with both. Monte Carlo simulations demonstrate that the proposed test has good size control and good power.

Suggested Citation

  • Ando, Tomohiro & Bai, Jushan, 2015. "A simple new test for slope homogeneity in panel data models with interactive effects," Economics Letters, Elsevier, vol. 136(C), pages 112-117.
    • Handle: RePEc:eee:ecolet:v:136:y:2015:i:c:p:112-117
    DOI: 10.1016/j.econlet.2015.09.019
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    Cited by:

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    More about this item

    Keywords

    Cross-sectional dependence; Endogenous regressors; Slope homogeneity;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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