Testing weak cross-sectional dependence in large panels

Arbeitspapier

This paper considers testing the hypothesis that errors in a panel data model are weakly Cross-sectionally dependent (CD), using the exponent of cross-sectional dependence introduced recently in Bailey, Kapetanios and Pesaran (2012). It is shown that the implicit null of the CD test depends on the relative expansion rates of N and T. It is argued that in the case of large N panels, the null of weak dependence is more appropriate than the null of independence which could be quite restrictive for large panels. Using Monte Carlo experiments, it is shown that the CD test has the correct size for values of the cross-sectional exponent that lie in the range [0, 1/4], for all combinations of N and T, and irrespective of whether the panel contains lagged values of the dependent variables, so long as there are no major asymmetries in the error distribution.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 3800

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Hypothesis Testing: General ; Estimation: General ; Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models
• Thema: exponent of cross-sectional dependence ; diagnostic tests ; panel data models ; dynamic heterogenous panels ; Panel ; Statistischer Fehler ; Statistischer Test ; Theorie

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Pesaran, M. Hashem
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2012

Weitere Informationen

• Handle: http://hdl.handle.net/10419/57947
• Letzte Aktualisierung: 10.03.2025, 11:41 MEZ