Efficient Estimation of Non-Linear Dynamic Panel Data Models with Application to Smooth Transition Models
CREATES Research Paper 2009-51
29 Pages
Posted: 2 Nov 2009
Australian National University (ANU) - Research School of Economics (RSE)
University of Melbourne - Department of Economics
University of Aarhus - Department of Economics
Date Written: October 2009
Abstract
This paper explores estimation of a class of non-linear dynamic panel data models with additive unobserved individual-specific effects. The models are specified by moment restrictions. The class includes the panel data AR(p) model and panel smooth transition models. We derive an efficient set of moment restrictions for estimation and apply the results to estimation of panel smooth transition models with fixed effects, where the transition may be determined endogenously. The performance of the GMM estimator, both in terms of estimation precision and forecasting performance, is examined in a Monte Carlo experiment. We find that estimation of the parameters in the transition function can be problematic but that there may be significant benefits in terms of forecast performance.
Keywords: dynamic panel data models, fixed effects, GMM estimation, smooth transition
JEL Classification: C13, C23
Suggested Citation:
Suggested Citation
Gørgens, Tue and Skeels, Christopher L. and Wurtz, Allan, Efficient Estimation of Non-Linear Dynamic Panel Data Models with Application to Smooth Transition Models (October 2009). CREATES Research Paper 2009-51. Available at SSRN: https://ssrn.com/abstract=1498444 or http://dx.doi.org/10.2139/ssrn.1498444
