Time Averaged CCE
Abstract
ABSTRACT A popular approach to interactive effects panel data models is the common correlated effects (CCE) estimator of Pesaran (Estimation and inference in large heterogeneous panels with a multifactor error structure. Econometrica 74 , 967–1012, 2006). The current paper proposes a modified version of this estimator that is useful in a number of cases where the original is not expected to work, such as when the number of cross‐sectional units is small. The idea is to use time instead of cross‐sectional averages of the observables to purge the interactive effects.
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Authors: Yousef Kaddoura, Yiannis Karavias, Joakim Westerlund
Institutions: Deakin University, Lund University, University of Birmingham, University of London, Örebro University, Brunel University of London