Estimation and Testing in a Fixed Effects Panel Data Model with Serially Correlated Error Component Disturbances

Author(s)/Creator(s)

Badi H. Baltagi, Syracuse UniversityFollow
Long Liu, Florida Atlantic UniversityFollow

Description/Abstract

This paper revisits the fixed effects panel data model with AR(1) remainder disturbances and provides a bias corrected estimator for the serial correlation coefficient based on first differencing the panel regression to get rid of the fixed effects. This bias corrected estimator builds upon the estimator proposed by Han and Phillips (2010). Asymptotic properties as well as Monte Carlo results are provided that show the better performance of this new proposed bias corrected estimator. This is extended to the unbalanced panel data case and also illustrated using the empirical application in Donohue and Levitt (2001).

Document Type

Working Paper

Date

5-1-2025

Keywords

Panel Data, Serial Correlation, Generalized Least Squares, Fixed Effects, First Difference, Nonstationarity

Language

English

Series

Working Papers Series

Disciplines

Econometrics | Economics

ISSN

1525-3066

Additional Information

Working Paper No. 267

Recommended Citation

Baltagi, Badi H. and Liu, Long, "Estimation and Testing in a Fixed Effects Panel Data Model with Serially Correlated Error Component Disturbances" (2025). Center for Policy Research. 499.
https://surface.syr.edu/cpr/499

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.