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On bootstrapping panel factor series

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  • Trapani, Lorenzo

Abstract

This paper studies the asymptotic validity of sieve bootstrap for nonstationary panel factor series. Two main results are shown. Firstly, a bootstrap Invariance Principle is derived pointwise in i, obtaining an upper bound for the order of truncation of the AR polynomial that depends on n and T. Consistent estimation of the long run variances is also studied for (n,T)→∞. Secondly, joint bootstrap asymptotics is also studied, investigating the conditions under which the bootstrap is valid. In particular, the extent of cross sectional dependence which can be allowed for is investigated. Whilst we show that, for general forms of cross dependence, consistent estimation of the long run variance (and therefore validity of the bootstrap) is fraught with difficulties, however we show that “one-cross-sectional-unit-at-a-time” resampling schemes yield valid bootstrap based inference under weak forms of cross-sectional dependence.

Suggested Citation

  • Trapani, Lorenzo, 2013. "On bootstrapping panel factor series," Journal of Econometrics, Elsevier, vol. 172(1), pages 127-141.
    • Handle: RePEc:eee:econom:v:172:y:2013:i:1:p:127-141
    DOI: 10.1016/j.jeconom.2012.09.001
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    Cited by:

    1. Trapani, Lorenzo, 2021. "Inferential theory for heterogeneity and cointegration in large panels," Journal of Econometrics, Elsevier, vol. 220(2), pages 474-503.
    2. Stephan Smeekes & Jean-Pierre Urbain, 2014. "On the Applicability of the Sieve Bootstrap in Time Series Panels," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 76(1), pages 139-151, February.
    3. Barigozzi, Matteo & Cho, Haeran & Fryzlewicz, Piotr, 2018. "Simultaneous multiple change-point and factor analysis for high-dimensional time series," Journal of Econometrics, Elsevier, vol. 206(1), pages 187-225.
    4. Robert Adamek & Stephan Smeekes & Ines Wilms, 2023. "Sparse High-Dimensional Vector Autoregressive Bootstrap," Papers 2302.01233, arXiv.org.
    5. Ipatova, Ekaterina & Trapani, Lorenzo, 2013. "First-differenced inference for panel factor series," Economics Letters, Elsevier, vol. 118(2), pages 364-366.
    6. Valeria D’Amato & Steven Haberman & Gabriella Piscopo & Maria Russolillo, 2014. "Computational framework for longevity risk management," Computational Management Science, Springer, vol. 11(1), pages 111-137, January.

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    More about this item

    Keywords

    Bootstrap; Invariance principle; Factor series; Vector AutoRegression; Joint asymptotics;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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