A Spatial Panel Quantile Model with Unobserved Heterogeneity
42 Pages Posted: 30 Jan 2020
Date Written: December 19, 2019
This paper introduces a spatial panel quantile model with unobserved heterogeneity. The proposed model is capable of capturing high-dimensional cross-sectional dependence and allows heterogeneous regression coefficients. For estimating model parameters, a new estimation procedure is proposed. When both the time and cross-sectional dimensions of the panel go to infinity, the uniform consistency and the asymptotic normality of the estimated parameters are established. In order to determine the dimension of the interactive fixed effects, we propose a new information criterion. It is shown that the criterion asymptotically selects the true dimension. Monte Carlo simulations document the satisfactory performance of the proposed method. Finally, the method is applied to study the quantile co-movement structure of the U.S. stock market by taking into account the input-output linkages as firms are connected through the input-output production network.
Keywords: Endogeneity; Heterogeneous panel; Quantile factor structure; Serial and cross-sectional correlations; Spatial effects
JEL Classification: C31, C33, E44
Suggested Citation: Suggested Citation