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Consistent OLS estimation of AR(1) dynamic panel data models with short time series

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  • Kazuhiko Hayakawa

Abstract

In this article, we examine the usefulness of the bias-corrected first-difference (BCFD) estimator by Chowdhury (1987) from two angles: inference and testing. First, we compare the BCFD estimator with Bun and Carree's (2005) estimator and the GMM estimator in terms of accuracy of inference. Second, we propose to use the Hausman test based on these three estimators to test the null of no individual effects. Simulation results show that the BCFD estimator and the Hausman test based on the BCFD estimator perform better than the other two estimators.

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  • Kazuhiko Hayakawa, 2007. "Consistent OLS estimation of AR(1) dynamic panel data models with short time series," Applied Economics Letters, Taylor & Francis Journals, vol. 14(15), pages 1141-1145.
    • Handle: RePEc:taf:apeclt:v:14:y:2007:i:15:p:1141-1145
    DOI: 10.1080/13504850600606109
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    1. Bun, Maurice J.G. & Carree, Martin A., 2005. "Bias-Corrected Estimation in Dynamic Panel Data Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 200-210, April.
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    7. Joaquim Ramalho, 2005. "Feasible bias-corrected OLS, within-groups, and first-differences estimators for typical micro and macro AR(1) panel data models," Empirical Economics, Springer, vol. 30(3), pages 735-748, October.
    8. Hayakawa, Kazuhiko, 2007. "Small sample bias properties of the system GMM estimator in dynamic panel data models," Economics Letters, Elsevier, vol. 95(1), pages 32-38, April.
    9. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
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    1. repec:ebl:ecbull:v:3:y:2006:i:27:p:1-10 is not listed on IDEAS
    2. Arturas Juodis, 2013. "First Difference Transformation in Panel VAR models: Robustness, Estimation and Inference," UvA-Econometrics Working Papers 13-06, Universiteit van Amsterdam, Dept. of Econometrics.
    3. Kazuhiko Hayakawa, 2006. "A Note on Bias in First-Differenced AR(1) Models," Economics Bulletin, AccessEcon, vol. 3(27), pages 1-10.

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