Recursive estimation in large panel data models: theory and practice

Bin Jiang, Yanrong Yang, Jiti Gao, Cheng Hsiao

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)

Abstract

Bai (2009) proposes recursive estimation for panel data models with interactive effects. We study the behaviours of this recursive estimator. The recursive formula is established that shows the behaviours of recursive estimators depend on the initial estimator, the population structure and the iterative steps. Under some general scenarios, we find that the recursive estimator becomes consistent after the first iteration from any initials. We also obtain the optimal number of iterative steps under some prescribed conditions. The central limit theorem of the recursive estimator is established when the initial estimator is OLS. Various simulations are conducted to support our theoretical findings.

Original languageEnglish
Number of pages27
JournalJournal of Econometrics
DOIs
Publication statusAccepted/In press - 2020

Keywords

  • Factor model
  • Initial estimation
  • Multiplicative structure
  • Nonlinear optimization

Cite this