The Time Series and Cross-Section Asymptotics of Dynamic Panel Data Estimators

• Javier Álvarez ^[1] ; Manuel Arellano ^[1]
  1. [1] Centro de Estudios Monetarios y Financieros

     Centro de Estudios Monetarios y Financieros

     Madrid, España

     
• Localización: Documentos de Trabajo ( CEMFI ), Nº. 8 (Working Paper No. 9808, December 1998), 1998
• Idioma: inglés
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• Resumen

  • In this paper we derive the asymptotic properties of within groups (WG), GMM and LIML estimators for an autoregressive model with random effects when both T and N tend to infinity. GMM and LIML are consistent and asymptotically equivalent to the WG estimator. When T/N->0 the fixed T results for GMM and LIML remain valid, but WG although consistent has an asymptotic bias in its asymptotic distribution. When T/N tends to a positive constant, the WG, GMM and LIML estimators exhibit negative asymptotic biases of order T,N and (2N-T), respectively. In addition, the crude GMM estimator that neglects the autocorrelation in first differenced errors is inconsistent as T/N->c>0, despite being consistent for fixed T. Finally, we discuss the properties of a random effects MLE with unrestricted initial conditions when both T and N tend to infinity.