Asymptotic consequences of neglected dynamics in individual effects models*
- 1 March 1994
- journal article
- Published by Wiley in Statistica Neerlandica
- Vol. 48 (1) , 71-85
- https://doi.org/10.1111/j.1467-9574.1994.tb01432.x
Abstract
We assess the asymptotic consequences of estimating static models based on cross‐section or panel data, when in reality the data are generated by a dynamic relationship, involving lagged dependent and current and lagged exogenous variables as well as individual effects. If the exogenous variable follows a stationary process, then the static estimators usually underestimate its long‐run effect. This inconsistency is less severe, the higher the autocorrelation of the exogenous variable. If the exogenous variable follows a random walk with or without individual‐specific drift, then the estimators are found to be consistent for the long‐run effect.Keywords
This publication has 6 references indexed in Scilit:
- Dynamic Models for Panel DataPublished by Elsevier ,1990
- Asymptotic Properties of Least Squares Estimators of Cointegrating VectorsEconometrica, 1987
- Short and Long Run Effects in Pooled ModelsInternational Economic Review, 1984
- Chapter 18 Dynamic specificationPublished by Elsevier ,1984
- Some Long Run Features of Dynamic Time Series ModelsThe Economic Journal, 1981
- The Interpretation of Cross Section Estimates in a Dynamic ModelEconometrica, 1961