A Conditional Approach to Panel Data Models with Common Shocks

This paper studies the effects of common shocks on the OLS estimators of the slopes’ parameters in linear panel data models. The shocks are assumed to affect both the errors and some of the explanatory variables. In contrast to existing approaches, which rely on using results on martingale differenc...

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Bibliographic Details
Main Authors: Giovanni Forchini, Bin Peng
Format: Article
Language:English
Published: MDPI AG 2016-01-01
Series:Econometrics
Subjects:
Online Access:http://www.mdpi.com/2225-1146/4/1/4
Description
Summary:This paper studies the effects of common shocks on the OLS estimators of the slopes’ parameters in linear panel data models. The shocks are assumed to affect both the errors and some of the explanatory variables. In contrast to existing approaches, which rely on using results on martingale difference sequences, our method relies on conditional strong laws of large numbers and conditional central limit theorems for conditionally-heterogeneous random variables.
ISSN:2225-1146