The Effects of Dynamic Feedbacks on LS and MM Estimator Accuracy in Panel Data Models: Some Additional Results

26 Pages Posted: 31 May 2009 Last revised: 21 Feb 2012

Date Written: June 10, 2010

Abstract

In this paper, we show that the order of magnitude of the finite sample bias of the GMMld^{(2)} estimator of Bun and Kiviet (2006) can be reduce from O(T/N) to O(1/N) if the optimal weighting matrix is used. To demonstrate this result, we consider a model transformed by the upper triangular Cholesky factorization of the inverse of the variance matrix of error component u_i. Some variants of the system GMM estimator that are associated with the Cholesky-transformed model are also discussed.

Suggested Citation

Hayakawa, Kazuhiko, The Effects of Dynamic Feedbacks on LS and MM Estimator Accuracy in Panel Data Models: Some Additional Results (June 10, 2010). Available at SSRN: https://ssrn.com/abstract=1412082 or http://dx.doi.org/10.2139/ssrn.1412082

Kazuhiko Hayakawa (Contact Author)

Hiroshima University ( email )

Japan

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