Scandinavian Working Papers in Economics
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Department of Economics, Lund University Working Papers, Department of Economics, Lund University

No 2014:7:
A Monte Carlo Study of a Factor Analytical Method for Fixed-Effects Dynamic Panel Models

Milda Norkute ()

Abstract: In a recent article Bai (Fixed-Effects Dynamic Panel Models, A Factor Analytical Method. Econometrica 81, 285-314, 2013a) proposes a new factor analytical method (FAM) for the estimation of fixed-effects dynamic panel data models, which has the unique and very useful property that it is asymptotically bias free. In this paper we provide Monte Carlo evidence of the good small-sample performance of FAM, that complement Bai's theoretical study.

Keywords: Dynamic panel data models; Heteroscedasticity; Monte Carlo simulations; (follow links to similar papers)

JEL-Codes: C13; C33; (follow links to similar papers)

20 pages, February 18, 2014

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