Publication Type

Journal Article

Publication Date

10-2016

Abstract

This paper provides a practical test for strict exogeneity in linear panel data models with fixed effects when the number of individuals N goes to infinity while the number of time periods T is fixed. The test is based on the supremum of a sequence of Wald test statistics. Under suitable conditions, we establish the asymptotic distribution of the test statistic and consistency of the test. A bootstrap procedure is proposed to improve the finite sample performance and the validity of the procedure is justified. We investigate the finite sample performance of the test via a small set of Monte Carlo simulations.

Keywords

Bootstrap, Fixed effects, Panel data, Strict exogeneity, Wald test

Discipline

Econometrics

Research Areas

Econometrics

Publication

Economics Letters

Volume

147

First Page

27

Last Page

31

ISSN

0165-1765

Identifier

10.1016/j.econlet.2016.08.012

Publisher

Elsevier

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org/10.1016/j.econlet.2016.08.012

Included in

Econometrics Commons

Share

COinS