The Asymptotics for Panel Models with Common Shocks

Author(s)/Creator(s)

Chihwa Kao, Syracuse University. Center for Policy ResearchFollow
Lorenzo Trapani, City University, Cass Business School (London, England) ; Bergamo University (Italy)Follow
Giovanni Urga, City University, Cass Business School (London, England)Follow

Description/Abstract

This paper develops a novel asymptotic theory for panel models with common shocks. We assume that contemporaneous correlation can be generated by both the presence of common regressors among units and weak spatial dependence among the error terms. Several characteristics of the panel are considered: cross sectional and time series dimensions can either be fixed or large; factors can either be observable or unobservable; the factor model can describe either cointegration relationship or a spurious regression, and we also consider the stationary case. We derive the rate of convergence and the distribution limits for the ordinary least squares (OLS) estimates of the model parameters under all the aforementioned cases.

Document Type

Working Paper

Date

2006

Keywords

cross-sectional dependence, common shocks, nonstationary panel

Language

English

Series

Working Papers Series

Disciplines

Econometrics

Additional Information

Harvest from RePEc at http://repec.org

Recommended Citation

Kao, Chihwa; Trapani, Lorenzo; and Urga, Giovanni, "The Asymptotics for Panel Models with Common Shocks" (2006). Center for Policy Research. 87.
https://surface.syr.edu/cpr/87

Source

Metadata from RePEc