Next Article in Journal
Generalized Information Matrix Tests for Detecting Model Misspecification
Next Article in Special Issue
Subset-Continuous-Updating GMM Estimators for Dynamic Panel Data Models
Previous Article in Journal
Panel Cointegration Testing in the Presence of Linear Time Trends
Previous Article in Special Issue
Estimation of Dynamic Panel Data Models with Stochastic Volatility Using Particle Filters
Article Menu

Export Article

Open AccessArticle
Econometrics 2016, 4(4), 44; doi:10.3390/econometrics4040044

Testing Cross-Sectional Correlation in Large Panel Data Models with Serial Correlation

1
Department of Economics & Center for Policy Research, 426 Eggers Hall, Syracuse University, Syracuse, NY 13244-1020, USA
2
Department of Economics, 365 Fairfield Way, U-1063, University of Connecticut, Storrs, CT 06269-1063, USA
3
Department of Finance, 523 School of Economics, Huazhong University of Science and Technology, Wuhan 430074, China
*
Author to whom correspondence should be addressed.
Academic Editors: In Choi and Ryo Okui
Received: 23 July 2016 / Revised: 12 October 2016 / Accepted: 19 October 2016 / Published: 4 November 2016
(This article belongs to the Special Issue Recent Developments in Panel Data Methods)
View Full-Text   |   Download PDF [325 KB, uploaded 4 November 2016]

Abstract

This paper considers the problem of testing cross-sectional correlation in large panel data models with serially-correlated errors. It finds that existing tests for cross-sectional correlation encounter size distortions with serial correlation in the errors. To control the size, this paper proposes a modification of Pesaran’s Cross-sectional Dependence (CD) test to account for serial correlation of an unknown form in the error term. We derive the limiting distribution of this test as N , T . The test is distribution free and allows for unknown forms of serial correlation in the errors. Monte Carlo simulations show that the test has good size and power for large panels when serial correlation in the errors is present. View Full-Text
Keywords: cross-sectional correlation test; serial correlation; large panel data model cross-sectional correlation test; serial correlation; large panel data model
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).

Scifeed alert for new publications

Never miss any articles matching your research from any publisher
  • Get alerts for new papers matching your research
  • Find out the new papers from selected authors
  • Updated daily for 49'000+ journals and 6000+ publishers
  • Define your Scifeed now

SciFeed Share & Cite This Article

MDPI and ACS Style

Baltagi, B.H.; Kao, C.; Peng, B. Testing Cross-Sectional Correlation in Large Panel Data Models with Serial Correlation. Econometrics 2016, 4, 44.

Show more citation formats Show less citations formats

Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Related Articles

Article Metrics

Article Access Statistics

1

Comments

[Return to top]
Econometrics EISSN 2225-1146 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
Back to Top