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Report

Estimating dynamic panel models: backing out the Nickell Bias


Abstract: We propose a novel estimator for the dynamic panel model, which solves the failure of strict exogeneity by calculating the bias in the first-order conditions as a function of the autoregressive parameter and solving the resulting equation. We show that this estimator performs well as compared with approaches in current use. We also propose a general method for including predetermined variables in fixed-effects panel regressions that appears to perform well.

Keywords: dynamic panel data; bias correction; econometrics;

JEL Classification: C2; C23; C26;

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Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Staff Reports

Publication Date: 2017-10-01

Number: 824