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Panel Time Series. Review of the Methodological Evolution

Author

Listed:
  • Tamara Burdisso

    (Central Bank of Argentina)

  • Máximo Sangiácomo

    (Central Bank of Argentina)

Abstract

The document focuses on the econometric treatment of macro panels, known in literature as panel time series. This new approach rejects the assumption of slopes’ homogeneity and handles nonstationarity. It also recognizes that the presence of crosssection dependence (CSD), i.e. some correlation structure in the error term between units due to the presence of unobservable common factors, squanders efficiency gains by operating with a panel. This led to a new set of estimators known in literature as Common Correlated Effect (CCE), which essentially consists of increasing the model to be estimated by adding the averages of the individuals in each time t, of both the dependent variable and the specific regressors of each individual. Finally, two Stata codes developed for the evaluation and treatment of the cross-section dependence are presented.

Suggested Citation

  • Tamara Burdisso & Máximo Sangiácomo, 2015. "Panel Time Series. Review of the Methodological Evolution," BCRA Working Paper Series 201568, Central Bank of Argentina, Economic Research Department.
    • Handle: RePEc:bcr:wpaper:201568
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    File URL: http://www.bcra.gov.ar/Pdfs/Investigaciones/WP_68_2015e.pdf
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    More about this item

    Keywords

    panel time series; nostationarity; panel unit root; mean group estimator; cross-section dependence; common correlated effect;
    All these keywords.

    JEL classification:

    • 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
    • C87 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Econometric Software

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