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Testing for Autocorrelation in Dynamic Random Effects Models

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  • Manuel Arellano

Abstract

This article develops, tests of covariance restrictions after estimating by three-stage least squares a dynamic random effects model from panel data. The asymptotic distribution of covariance matrix estimates under non-normality is obtained. It is shown how minimum chi-square tests for interesting covariance restrictions can be calculated from a generalised linear regression involving the sample autocovariances and dummy variables. Asymptotic efficiency exploiting covariance restrictions can also be attained using a GLS estimator.

Suggested Citation

  • Manuel Arellano, 1990. "Testing for Autocorrelation in Dynamic Random Effects Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(1), pages 127-134.
    • Handle: RePEc:oup:restud:v:57:y:1990:i:1:p:127-134.
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    File URL: http://hdl.handle.net/10.2307/2297546
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    1. Galbraith, John W. & Zinde-Walsh, Victoria, 1995. "Transforming the error-components model for estimation with general ARMA disturbances," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 349-355.
    2. Halkos, George E. & Tzeremes, Nickolaos G., 2011. "Oil consumption and economic efficiency: A comparative analysis of advanced, developing and emerging economies," Ecological Economics, Elsevier, vol. 70(7), pages 1354-1362, May.
    3. Su, Liangjun & Lu, Xun, 2013. "Nonparametric dynamic panel data models: Kernel estimation and specification testing," Journal of Econometrics, Elsevier, vol. 176(2), pages 112-133.
    4. Isabel Proença & Maria Paula Fontoura & Nuno Crespo, 2002. "Productivity Spillovers from Multinational Corporations in the Portuguese Case: Evidence from a Short Time Period Panel Data," Working Papers Department of Economics 2002/06, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    5. Ms. Deniz O Igan & Ms. Natalia T. Tamirisa, 2008. "Are Weak Banks Leading Credit Booms? Evidence from Emerging Europe," IMF Working Papers 2008/219, International Monetary Fund.
    6. Hao Thi Kim Do & Nguyet Thi Minh Nguyen & Trung Hai Le, 2017. "Effects of the Credit Boom on the Soundness of Vietnamese Commercial Banks," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 8(3), pages 57-73, July.
    7. Yiannis Karavias & Elias Tzavalis, 2017. "Local power of panel unit root tests allowing for structural breaks," Econometric Reviews, Taylor & Francis Journals, vol. 36(10), pages 1123-1156, November.
    8. International Monetary Fund, 2006. "Czech Republic, Republic of Estonia, Hungary, Republic of Latvia, Republic of Lithuania, Republic of Poland, Slovak Republic, and Republic of Slovenia; Export Structure and Credit Growth," IMF Staff Country Reports 06/414, International Monetary Fund.
    9. Lee, Yoon-Jin, 2014. "Testing a linear dynamic panel data model against nonlinear alternatives," Journal of Econometrics, Elsevier, vol. 178(P1), pages 146-166.
    10. Kim, Yangseon & Schmidt, Peter, 2008. "Marginal Comparisons With the Best and the Efficiency Measurement Problem," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 253-260, April.
    11. Massa, Massimo, 2003. "How do family strategies affect fund performance? When performance-maximization is not the only game in town," Journal of Financial Economics, Elsevier, vol. 67(2), pages 249-304, February.
    12. Ouoba, Youmanli, 2020. "Natural resources fund types and capital accumulation: A comparative analysis," Resources Policy, Elsevier, vol. 66(C).
    13. Yiannis Karavias & Elias Tzavalis, 2014. "Testing for unit roots in panels with structural changes, spatial and temporal dependence when the time dimension is finite," Discussion Papers 14/03, University of Nottingham, Granger Centre for Time Series Econometrics.
    14. Antonio Musolesi & Mario Nosvelli, 2007. "Dynamics of residential water consumption in a panel of Italian municipalities," Applied Economics Letters, Taylor & Francis Journals, vol. 14(6), pages 441-444.
    15. Thi Hien Nguyen, 2020. "Impact of Bank Capital Adequacy on Bank Profitability under Basel II Accord: Evidence from Vietnam," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 45(1), pages 31-46, March.
    16. Ms. Deniz O Igan & Marcelo Pinheiro, 2011. "Credit Growth and Bank Soundness: Fast and Furious?," IMF Working Papers 2011/278, International Monetary Fund.

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