Publication Type
Journal Article
Version
Preprint
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
Citation
SU, Liangjun; ZHANG, Yonghui; and WEI, Jie.
A practical test for strict exogeneity in linear panel data models with fixed effects. (2016). Economics Letters. 147, 27-31. Research Collection School Of Economics.
Available at: https://ink.library.smu.edu.sg/soe_research/1936
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.
Additional URL
https://doi.org/10.1016/j.econlet.2016.08.012