Bias in Dynamic Panel Models Under Time Series Misspecification
19 Pages Posted: 20 May 2011
Date Written: March 9, 2011
We consider within-group estimation of higher-order autoregressive panel models with exogenous regressors and fixed effects, where the lag order is possibly misspecified. Even when disregarding the misspecification bias, the fixed-effect bias formula is quite different from the correctly specified case though its asymptotic order remains the same under the stationarity. We suggest bias reduction methods under the possible time series misspecification.
Keywords: Dynamic panel, Fixed effects, Misspecification, Bias reduction, Lag order
JEL Classification: C23, C33
Suggested Citation: Suggested Citation