Testing slope homogeneity in large panels

This paper proposes a standardized version of Swamy's test of slope homogeneity for panel data models where the cross section dimension ( N ) could be large relative to the time series dimension ( T ). The proposed test, denoted by Δ ˜ , exploits the cross section dispersion of individual slope...

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Veröffentlicht in:	Journal of econometrics Jg. 142; H. 1; S. 50 - 93
Hauptverfasser:	Hashem Pesaran, M., Yamagata, Takashi
Format:	Journal Article
Sprache:	Englisch
Veröffentlicht:	Amsterdam Elsevier B.V 01.01.2008 Elsevier Elsevier Sequoia S.A
Schriftenreihe:	Journal of Econometrics
Schlagworte:	Applications Dispersion tests Distribution theory Dynamic models Econometrics Economic models Errors Exact sciences and technology Experiments Homogeneity Inference from stochastic processes; time series analysis Insurance, economics, finance Large panels Linear inference, regression Mathematics Monte Carlo results Monte Carlo simulation Normal distribution Panel data Probability and statistics Probability theory and stochastic processes Sciences and techniques of general use Statistics Studies Tests Tests of slope homogeneity Time series Tests of slope homogeneity Monte Carlo results Dispersion tests C33 C12 Large panels Large dimension Statistical distribution Error estimation Bias Gaussian distribution Stochastic method Stochastic process Economic data Variance Statistical test Panel data Distribution function Approximation theory Dynamic model Mathematical expansion Expansion Monte Carlo method Data analysis Covariance analysis Time series Statistical estimation Variance analysis Mean estimation Homogeneity test Statistical method Statistical regression Numerical analysis Mean error Autocorrelation Econometrics Biased estimation Autoregressive processes
ISSN:	0304-4076, 1872-6895
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Zusammenfassung:	This paper proposes a standardized version of Swamy's test of slope homogeneity for panel data models where the cross section dimension ( N ) could be large relative to the time series dimension ( T ). The proposed test, denoted by Δ ˜ , exploits the cross section dispersion of individual slopes weighted by their relative precision. In the case of models with strictly exogenous regressors, but with non-normally distributed errors, the test is shown to have a standard normal distribution as ( N , T ) → j ∞ such that N / T 2 → 0 . When the errors are normally distributed, a mean-variance bias adjusted version of the test is shown to be normally distributed irrespective of the relative expansion rates of N and T . The test is also applied to stationary dynamic models, and shown to be valid asymptotically so long as N / T → κ , as ( N , T ) → j ∞ , where 0 ⩽ κ < ∞ . Using Monte Carlo experiments, it is shown that the test has the correct size and satisfactory power in panels with strictly exogenous regressors for various combinations of N and T . Similar results are also obtained for dynamic panels, but only if the autoregressive coefficient is not too close to unity and so long as T ⩾ N .
Bibliographie:	SourceType-Scholarly Journals-1 ObjectType-Feature-1 content type line 14 ObjectType-Article-2 content type line 23
ISSN:	0304-4076 1872-6895
DOI:	10.1016/j.jeconom.2007.05.010