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Working Paper
Pooled Bewley Estimator of Long-Run Relationships in Dynamic Heterogenous Panels
Using a transformation of the autoregressive distributed lag model due to Bewley, a novel pooled Bewley (PB) estimator of long-run coefficients for dynamic panels with heterogeneous short-run dynamics is proposed. The PB estimator is directly comparable to the widely used Pooled Mean Group (PMG) estimator, and is shown to be consistent and asymptotically normal. Monte Carlo simulations show good small sample performance of PB compared to the existing estimators in the literature, namely PMG, panel dynamic OLS (PDOLS) and panel fully-modified OLS (FMOLS). Application of two bias-correction ...
Working Paper
Pooled Bewley Estimator of Long-Run Relationships in Dynamic Heterogenous Panels
This paper, using the Bewley (1979) transformation of the autoregressive distributed lag model, proposes a novel pooled Bewley (PB) estimator of long-run coefficients for dynamic panels with heterogeneous short-run dynamics, in the same setting as the widely used Pooled Mean Group (PMG) estimator. Asymptotic normality of the PB estimator is established, and Monte Carlo simulations reveal a good small sample performance of PB compared with existing estimators in the literature, namely PMG, PDOLS and FMOLS. This paper also considers application of two bias-correction methods and a bootstrapping ...
Working Paper
Mean Group Estimation in Presence of Weakly Cross-Correlated Estimators
This paper extends the mean group (MG) estimator for random coefficient panel data models by allowing the underlying individual estimators to be weakly cross-correlated. Weak cross-sectional dependence of the individual estimators can arise, for example, in panels with spatially correlated errors. We establish that the MG estimator is asymptotically correctly centered, and its asymptotic covariance matrix can be consistently estimated. The random coefficient specification allows for correct inference even when nothing is known about the weak cross-sectional dependence of the errors. This is ...
Working Paper
Xtpb: The Pooled Bewley Estimator of Long Run Relationships in Dynamic Heterogeneous Panels
This paper introduces a new Stata command, xtpb, that implements the Chudik, Pesaran and Smith (2023a) Pooled Bewley (PB) estimator of long-run relationships in dynamic heterogeneous panel-data models. The PB estimator is based on the Bewley (1979) transform of the autoregressive-distributed lag model and it is applicable under a similar setting as the widely used pooled mean group (PMG) estimator of Pesaran, Shin and Smith (1999). Two bias-correction methods and a bootstrapping algorithm for more accurate small-sample inference robust to arbitrary cross-sectional dependence of errors are ...