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Correction for the Asymptotical Bias of the Arellano-Bond type GMM Estimation of Dynamic Panel Models

In: Essays in Honor of Cheng Hsiao

Author

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  • Yonghui Zhang
  • Qiankun Zhou

Abstract

It is shown in the literature that the Arellano–Bond type generalized method of moments (GMM) of dynamic panel models is asymptotically biased (e.g., Hsiao & Zhang, 2015; Hsiao & Zhou, 2017). To correct the asymptotical bias of Arellano–Bond GMM, the authors suggest to use the jackknife instrumental variables estimation (JIVE) and also show that the JIVE of Arellano–Bond GMM is indeed asymptotically unbiased. Monte Carlo studies are conducted to compare the performance of the JIVE as well as Arellano–Bond GMM for linear dynamic panels. The authors demonstrate that the reliability of statistical inference depends critically on whether an estimator is asymptotically unbiased or not.

Suggested Citation

  • Yonghui Zhang & Qiankun Zhou, 2020. "Correction for the Asymptotical Bias of the Arellano-Bond type GMM Estimation of Dynamic Panel Models," Advances in Econometrics, in: Essays in Honor of Cheng Hsiao, volume 41, pages 1-24, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:aecozz:s0731-905320200000041001
    DOI: 10.1108/S0731-905320200000041001
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    Citations

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    Cited by:

    1. Mehic, Adrian, 2020. "Half-panel jackknife estimation for dynamic panel models," Economics Letters, Elsevier, vol. 190(C).

    More about this item

    Keywords

    Dynamic panel models; generalized method of moments; asymptotical bias; jackknife instrumental variables estimation; statistical inference; bias reduction; C01; C13; C23;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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