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A SIMPLE EFFICIENT INSTRUMENTAL VARIABLEESTIMATOR FOR PANEL AR(p) MODELSWHEN BOTH N AND TARE LARGE

Published online by Cambridge University Press:  01 June 2009

Kazuhiko Hayakawa
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Abstract

In this paper, we show that for panelAR(p) models, an instrumentalvariable (IV) estimator with instruments deviatedfrom past means has the same asymptotic distributionas the infeasible optimal IV estimator when bothN and T, thedimensions of the cross section and time series, arelarge. If we assume that the errors are normallydistributed, the asymptotic variance of the proposedIV estimator is shown to attain the lower bound whenboth N and T arelarge. A simulation study is conducted to assess theestimator.

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Type
Brief Report
Information
Econometric Theory , Volume 25 , Issue 3 , June 2009 , pp. 873 - 890
Copyright
Copyright © Cambridge University Press 2009

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Footnotes

The author is deeply grateful to the co-editor,two anonymous referees, Kaddour Hadri, Chirok Han,Cheng Hsiao, Naoto Kunitomo, Eiji Kurozumi, KosukeOya, Peter Phillips, Donggyu Sul, Taku Yamamoto,and the participants of the 14th InternationalConference of Panel Data at Xiamen University, theFall meeting of the Japanese Economic Associationat Nihon University, the Hitotsubashi Conferenceon Econometrics 2007, and the special 18th meetingof the New Zealand Econometric Study Group at theUniversity of Auckland for helpful comments. Theauthor also acknowledges Ryo Okui, who posed aquestion that inspired this paper. The researchbenefited from the JSPS fellowship and aGrant-in-Aid for Scientific Research (KAKENHI20830056) of the JSPS. All remaining errors aremine. Finally, this paper is dedicated to the lateProfessor Satoru Kanoh, who provided usefulcomments on an early version of this paper.

References

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