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Econometrics 2016, 4(1), 4; doi:10.3390/econometrics4010004

A Conditional Approach to Panel Data Models with Common Shocks

1
School of Economics, Ground Floor AD Building, University of Surrey, Guildford, Surrey GU2 7XH, UK
2
Economics Discipline Group, University of Technology Sydney, Sydney 2007, Australia
*
Author to whom correspondence should be addressed.
Academic Editor: Kerry Patterson
Received: 15 September 2015 / Revised: 21 December 2015 / Accepted: 6 January 2016 / Published: 12 January 2016
View Full-Text   |   Download PDF [274 KB, uploaded 12 January 2016]

Abstract

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. View Full-Text
Keywords: factor structure; common shocks; conditional independence; conditional central limit theorem factor structure; common shocks; conditional independence; conditional central limit theorem
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Forchini, G.; Peng, B. A Conditional Approach to Panel Data Models with Common Shocks. Econometrics 2016, 4, 4.

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