March 2, 2010, 15:30–17:00
Room MF 323
In this paper we propose a bootstrap method for panel data linear regression models with individual fixed effects. The method consists of applying the standard moving blocks bootstrap of K¨unsch (1989) and Liu and Singh (1992) to the vector containing all the individual observations at each point in time. We show that this bootstrap is robust to serial and cross sectional dependence of unknown form under the assumption that n (the cross sectional dimension) is an arbitrary nondecreasing function of T (the time series dimension), where T → ∞, thus allowing for the possibility that both n and T diverge to infinity. The time series dependence is assumed to be weak (of the mixing type) but we allow the cross sectional dependence to be either strong or weak (including the case where it is absent). Under appropriate conditions, we show that the fixed effects estimator (as well as its bootstrap analogue) have convergence rates that depend on the degree of cross section dependence in the panel. Despite this, the same studentized test statistics can be computed without reference to the degree of cross section dependence. Our simulation results show that the moving blocks bootstrap percentile-t intervals have very good coverage properties even when the degree of serial and cross sectional correlation is large, provided the block size is appropriately chosen.
Silvia Goncalves (Université de Montréal), “The moving blocks bootstrap for panel linear regression models with individual fixed effects”, Econometrics Seminar, Toulouse: TSE, March 2, 2010, 15:30–17:00, room MF 323.