A practical test for strict exogeneity in linear panel data models with fixed effects
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,...
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Main Authors: | , , |
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Format: | text |
Language: | English |
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Institutional Knowledge at Singapore Management University
2016
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Subjects: | |
Online Access: | https://ink.library.smu.edu.sg/soe_research/1936 https://ink.library.smu.edu.sg/context/soe_research/article/2935/viewcontent/PracticalTestStrictExogenityLinearPanelModels_20160715_pp.pdf |
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Institution: | Singapore Management University |
Language: | English |
Summary: | 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. |
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