Online Supplement to an Incidental Parameters Free Inference Approach for Panels with Common Shocks

Abstract

This paper is an online supplementary appendix to “An Incidental Parameters Free Inference Approach for Panels with Common Shocks”. Section S.1 of the present Supplementary Appendix studies the properties of the proposed GMM estimators under fixed T asymptotics. Section S.2 analyses the effect of transforming the model in terms of time-specific cross-sectional averages on the proposed estimating equations. Section S.3 considers identification-robust inference, building upon the idea of Anderson and Rubin (1949) and Stock and Wright (2000). Finally, Section S.4 discusses local and global identification for the panel AR(1) model and reports additional Monte Carlo results for this model.

Keywords: Common Factors, GMM, Incidental Parameter Problem, Endogenous Regressors, U-statistic

JEL Classification: C13, C15, C23