skip to main content

A SIMULATION STUDY OF FIXED-B ASYMPTOTIC DISTRIBUTIONS IN LINEAR PANEL MODELS WITH FIXED EFFECTS

*Indah Rini Setyowati  -  Statistics Department, IPB University, Indonesia
Khairil Anwar Notodiputro  -  Statistics Department, IPB University, Indonesia
Anang Kurnia  -  Statistics Department, IPB University, Indonesia
Open Access Copyright (c) 2020 MEDIA STATISTIKA under http://creativecommons.org/licenses/by-nc-sa/4.0.

Citation Format:
Abstract
In linear models, panel data often violates the assumption that the error terms should be independent. As a result, the estimated variance is usually large and the standard inferential methods are not appropriate. The previous research developed an inference method to solve this problem using a variance estimator namely the Heteroskedasticity Autocorrelation Consistent of the Cross-Section Averages (HACSC), with some improvements. The test statistic of this method converges to the fixed-b asymptotic distribution. In this paper, the performance of the proposed inferential method is evaluated by means of simulation and compared with the standard method using plm package in R. Several comparisons regarding the Type I Error of these two methods have been carried out. The results showed that the statistical inference based on fixed-b asymptotic distribution out-perform the standard method, especially for the panel data with small number of individual and time dimension.

Note: This article has supplementary file(s).

Fulltext View|Download |  Copyright Transfer Agreement
A SIMULATION STUDY OF FIXED-B ASYMPTOTIC DISTRIBUTIONS IN LINEAR PANEL MODELS WITH FIXED EFFECTS
Subject
Type Copyright Transfer Agreement
  Download (376KB)    Indexing metadata
Keywords: Fixed-b asymptotic distribution; Fixed effect; HAC; HACSC; Panel data

Article Metrics:

  1. Agresti, A. (2006). An Introduction to Categorical Data Analysis: Second Edition. John Wiley & Sons. Canada. https://doi.org/10.1002/0470114754
  2. Andrews, D. W. K. (1991). Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation. Econometrica, 59(3), 817-858. https://doi.org/10.2307/2938229
  3. Baltagi, B. H. (2013). Econometric Analysis of Panel Data - Fifth Edition. John Wiley & Sons. Chichester
  4. Beaver, R. J., Beaver, B. M., & Mendenhall. (2009). Introduction to Probability and Statistics 13th Edition. Brooks/Cole, Cengage Learning, Belmont, CA
  5. Croissant, Y. & Millo, G. (2008). Panel Data Econometrics in R: The plm Package. Journal of Statistical Software, 27(2), 1-43. https://doi.org/10.18637/jss.v027.i02
  6. Driscoll, J. C. & Kraay, A. C. (1998). Consistent Covariance Matrix Estimation with Spatially Dependent Panel Data. Review of Economics and Statistics, 80(4), 549-560. https://doi.org/10.1162/003465398557825
  7. Greene, W. W. H. . (2012). Econometric Analysis 7th Ed. Prentice Hall. New York
  8. Gujarati, D. N. (2004). Basic Econometrics 4th Edition. The McGraw-Hill. New York
  9. Kiefer, N. M. & Vogelsang, T. J. (2005). A New Asymptotic Theory for Heteroskedasticity-Autocorrelation Robust Tests. Econometric Theory, 21(6), 1130-1164. https://doi.org/10.1017/ S0266466605050565
  10. Millo, G. (2017). Robust Standard Error Estimators for Panel Models: A Unifying Approach. Journal of Statistical Software, 82(3), 1-27. https://doi.org/10.18637/jss.v082.i03
  11. Newey, W. K. & West, K. D. (1987). A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix. Econometrica, 55(3), 703-708
  12. Sun, Y., Phillips, P. C. B., & Jin, S. (2008). Optimal Bandwidth Selection In Heteroskedasticity-Autocorrelation Robust Testing. Econometrica, 76(10), 175-194. https://doi.org/10.1111/j.0012-9682.2008.00822.x
  13. Velasco, C., & Robinson, P. M. (2001). Edgeworth Expansions For Spectral Density Estimates and Studentized Sample Mean. Econometric Theory, 17(3), 497-539. https://doi.org/10.1017/S0266466601173019
  14. Vogelsang, T. J. (2011). Heteroskedasticity, Autocorrelation, and Spatial Correlation Robust Inference in Linear Panel Models with Fixed-Effects, Working Paper, Department of Economics, Michigan State University
  15. Vogelsang, T. J. (2012). Heteroskedasticity, Autocorrelation, and Spatial Correlation Robust Inference in Linear Panel Models with Fixed-Effects. Journal of Econometrics, 166(2), 303-319. https://doi.org/10.1016/j.jeconom.2011.10.001
  16. Zeileis, A. (2004). Econometric computing with HC and HAC Covariance Matrix Estimators. Journal of Statistical Software, Vol 11(10). https://doi.org/10.18637/jss.v011.i10

Last update:

No citation recorded.

Last update: 2024-02-23 21:44:30

No citation recorded.