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System Estimation of Panel Data Models under Long-Range Dependence

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  • Yunus Emre Ergemen

    (Aarhus University and CREATES)

Abstract

A general dynamic panel data model is considered that incorporates individual and interactive fixed effects allowing for contemporaneous correlation in model innovations. The model accommodates general stationary or nonstationary long-range dependence through interactive fixed effects and innovations, removing the necessity to perform a priori unit-root or stationarity testing. Moreover, persistence in innovations and interactive fixed effects allows for cointegration; innovations can also have vector-autoregressive dynamics; deterministic trends can be featured. Estimations are performed using conditional-sum-of-squares criteria based on projected series by which latent characteristics are proxied. Resulting estimates are consistent and asymptotically normal at standard parametric rates. A simulation study provides reliability on the estimation method. The method is then applied to the long-run relationship between debt and GDP.

Suggested Citation

  • Yunus Emre Ergemen, 2016. "System Estimation of Panel Data Models under Long-Range Dependence," CREATES Research Papers 2016-02, Department of Economics and Business Economics, Aarhus University.
    • Handle: RePEc:aah:create:2016-02
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    References listed on IDEAS

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    Cited by:

    1. Carlos Vladimir Rodríguez-Caballero, 2016. "Panel Data with Cross-Sectional Dependence Characterized by a Multi-Level Factor Structure," CREATES Research Papers 2016-31, Department of Economics and Business Economics, Aarhus University.
    2. Ergemen, Yunus Emre & Rodríguez-Caballero, C. Vladimir, 2023. "Estimation of a dynamic multi-level factor model with possible long-range dependence," International Journal of Forecasting, Elsevier, vol. 39(1), pages 405-430.
    3. Yunus Emre Ergemen & Carlos Vladimir Rodríguez-Caballero, 2016. "A Dynamic Multi-Level Factor Model with Long-Range Dependence," CREATES Research Papers 2016-23, Department of Economics and Business Economics, Aarhus University.

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    More about this item

    Keywords

    Long memory; factor models; panel data; endogeneity; fixed effects; debt and GDP;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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