On the Heterogeneity Bias of Pooled Estimators in Stationary VAR Specifications
Person/Institution:
Publisher:
International Monetary Fund
Ort:
Washington, D.C
Date:
2003
Language:
Englisch
Additional information
Abstract:
This paper studies asymptotically the bias of the fixed effect (FE) estimator induced by cross-section heterogeneity in the slope parameters of stationary vector autoregressions (VARs). The paper also compares the FE, the mean group estimator (MG), and a simple instrumental variable alternative (IV) in Monte Carlo simulations. The main results are: (i) asymptotically, the heterogeneity bias of the FE may be more or less severe in VAR specifications than in standard dynamic panel data specifications; (ii) in Monte Carlo simulations, slope heterogeneity must be relatively high to be a source of concern for pooled estimators; (iii) when this happens, the panel must be longer than a typical macro dataset for the MG to be a viable solution
Object text:
Rebucci, Alessandro
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Online-Ausg.
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Created:
2023-04-13
Last changed:
2023-01-26
Added to portal:
2023-04-13
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