Operations Management and Econometrics

Cross-sectional Dependence in Panel Data Analysis

Dr Vasilis Sarafidis, The University of Sydney Business School

4th Nov 2011  11:00 am - Room 498, Merewether Building (H04)

This paper provides an overview of the existing literature on panel data models with error cross-sectional dependence. We distinguish between spatial dependence and factor structure dependence and we analyse the implications of weak and strong cross-sectional dependence on the properties of the estimators. We consider estimation under strong and weak exogeneity of the regressors for both T fixed and T large cases. Available tests for error cross-sectional dependence and methods for determining the number of factors are discussed in detail. The finite-sample properties of some estimators and statistics are investigated using Monte Carlo experiments.

The paper can be downloaded from the following web link:
http://mpra.ub.uni-muenchen.de/20815/1/MPRA_paper_20815.pdf

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