Test of hypotheses in a time trend panel data model with serially correlated error component disturbances

Badi H. Baltagi, Chihwa Kao, Long Liu

Research output: Contribution to journalArticle

1 Scopus citations

Abstract

This paper studies test of hypotheses for the slope parameter in a linear time trend panel data model with serially correlated error component disturbances. We propose a test statistic that uses a bias corrected estimator of the serial correlation parameter. The proposed test statistic which is based on the corresponding fixed effects feasible generalized least squares (FE-FGLS) estimator of the slope parameter has the standard normal limiting distribution which is valid whether the remainder error is I(0) or I(1). This performs well in Monte Carlo experiments and is recommended.

Original languageEnglish (US)
Pages (from-to)347-394
Number of pages48
JournalAdvances in Econometrics
Volume33
DOIs
StatePublished - 2014

Keywords

  • First difference
  • Fixed effects
  • Generalized least squares
  • Nonstationarity
  • Panel data
  • Time trend model

ASJC Scopus subject areas

  • Economics and Econometrics

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