Maximum-Likelihood Based Inference in the Two-Way Random Effects Model with Serially Correlated Time Effects

Posted: 30 Mar 2013

See all articles by Jimmy Skoglund

Jimmy Skoglund

SAS Institute Inc.

Sune Karlsson

University of Orebro - Department of Economics

Date Written: March 28, 2004

Abstract

The general case where the time specific effect in a two way model follows an arbitrary ARMA process has not been considered previously. We offer a straightforward maximum likelihood estimator for this case. Allowing for general ARMA processes raises the issue of model specification and we propose tests of the null hypothesis of no serial correlation as well as tests for discriminating between different specifications. A Monte-Carlo experiment evaluates the finite-sample properties of the estimators and test-statistics.

Keywords: Random effects model, maximum likelihood, ARMA

Suggested Citation

Skoglund, Jimmy and Karlsson, Sune, Maximum-Likelihood Based Inference in the Two-Way Random Effects Model with Serially Correlated Time Effects (March 28, 2004). Empirical Economics, 2004, Available at SSRN: https://ssrn.com/abstract=2241029

Jimmy Skoglund (Contact Author)

SAS Institute Inc. ( email )

100 SAS Campus Drive
Cary, NC 27513-2414
United States

Sune Karlsson

University of Orebro - Department of Economics ( email )

SE-70182 Orebro
Sweden
+46 19 301 257 (Phone)

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