Joakim Westerlund
Professor, Programchef - Magisterprogram i Dataanalys och ekonomi
The factor analytical approach in trending near unit root panels
Författare
Summary, in English
In this study, we revisit the factor analytical (FA) approach for (near unit root) dynamic panel data models, whose asymptotic distribution has been shown to be normal and well centered at zero without the need for valid instruments or correction for bias. It is therefore very appealing. The question is: Does the appeal of FA, which so far has only been documented for fixed effects panels, extends to panels with incidental trends? This is an important question, because many persistent variables are trending. The answer turns out to be negative. In particular, while consistent, the asymptotic normality of FA breaks down when there is an exact unit root present, which limits its applicability.
Avdelning/ar
- Nationalekonomiska institutionen
Publiceringsår
2022
Språk
Engelska
Sidor
501-508
Publikation/Tidskrift/Serie
Journal of Time Series Analysis
Volym
43
Issue
3
Dokumenttyp
Artikel i tidskrift
Förlag
Wiley-Blackwell
Ämne
- Economics and Business
Nyckelord
- Factor analytical method
- Hessian
- incidental trends
- near unit root
- panel
Status
Published
ISBN/ISSN/Övrigt
- ISSN: 0143-9782